While the law has struggled to catch up with the swift progression of technology in recent years, particularly the increase in internet use, many companies have taken advantage of the ease of acquiring consumers’ information. It is easier than ever for companies to gain access to an individual’s credit card information. Many companies make deals with each other to share this information, despite the fact that such agreements are illegal.
Many laws, though, remain relevant regardless of whether the transaction took place online or in person. This was demonstrated in one recent class action lawsuit against an online marketing company. The named plaintiffs filed their class action lawsuit against a company which performs background checks. The plaintiffs noticed that regular monthly charges appeared on their credit card for a report which they allege they did not intend to buy. The company performing the background checks said that the consumers were misled into purchasing the subscription of the online marketing company. As a result, the marketing company was added as a third defendant.
The background check company provided space on its website for the marketing company and used a “data pass” method of sharing credit card information which is now illegal. The marketing company used that shared information to enroll customers in free trial subscription offers which were then converted into a monthly billed subscription.
The marketing company moved to force the lawsuit into arbitration.
The district court ruled that the consumers had entered into a contract with the marketing company, but the court denied the motion to force arbitration.
The plaintiffs appealed and the case went to the Ninth Circuit Court of Appeals. The appellate court noted that, under Washington law, a contract requires mutual assent to its essential terms in order to be considered legally binding. Those essential terms include the names of the parties involved in the contract. The appellate court found that the web page which the consumers used to buy the subscription service did not sufficiently identify the marketing company as the party making the contract with the consumers. The appellate court also remained skeptical as to whether providing an email address and clicking a “yes” button is sufficient to agree to a contract. Such clicks are still new enough that many courts don’t quite know how to handle them.
The appellate court also denied the marketing company’s motion to force the case into arbitration. The court decided that, since the arbitration provision was on another hyperlink which the consumers did not click on, no valid arbitration agreement took place.
Arbitration agreements have grown increasingly popular with companies in recent years. Consumers and employees alike are both being asked to sign more and more contracts containing arbitration agreements. These agreements tend to favor the company over the individual as they make class actions impossible and the arbitrator is often chosen and paid for by the company. The higher courts have upheld many arbitration agreements in recent years, but not all of the appellate courts have been as favorable to the agreements. Many have been found to be unenforceable and the likelihood of such a finding can only increase if the consumer never even saw the arbitration agreement.
When a company is publicly owned, it needs to be aware that it has a responsibility, not only to its customers, but also to its shareholders. The recent class action lawsuits against Lumber Liquidators are good examples of this fact.
Shareholders filed a lawsuit against Lumber Liquidators when it came to light that the company had allegedly imported wood from the habitat of an endangered species and sold wood with elevated levels of formaldehyde. This lawsuit demonstrates the fact that selling unsafe materials has the potential to cause harm, not only to the customers who purchase the material, but also the people who have invested money in the company.
Shortly after the shareholders filed their lawsuit against Lumber Liquidators, customers who had purchased wood from the company filed a similar lawsuit.
Lumber Liquidators has been under investigation recently for importing wood from China which was allegedly harvested in Russia from the habitat of the endangered Siberian tiger. Taking lumber from the habitat of an endangered species is in direct violation of the Lacey Act, a conservation law which has been in existence in the United States since 1900. The Act was put in place to protect plants and wild animals from the hazards of industrialization. Among other things, the Act prohibits trading in wildlife, fish, and plants which have been illegally harvested, transported, or sold. In 2008, the Act was amended to include anti-illegal-logging provisions which makes it illegal to take wood from the habitat of an endangered species.
In addition to violating the Lacey Act, the lawsuits allege that Lumber Liquidators sold wood which contained unsafe levels of formaldehyde. According to the Environmental Protection Agency, formaldehyde is an important component in the production of processed wood products and other home goods. However, it has also “been shown to cause cancer in animals and may cause cancer in humans”. The gas also has the potential to cause other health problems, including eye, nose, and throat irritation, wheezing and coughing, fatigue, and severe allergic reactions. Because of these health concerns, the federal government has imposed limits on the amount of formaldehyde that it deems safe to use in wood products.
Needless to say, when consumers discovered that the wood they had purchased might not be safe, they expressed serious concerns regarding the matter. The consumers’ lawsuit was filed by three consumers who are petitioning the court to be named plaintiffs in the class action lawsuit against Lumber Liquidators. Each of these consumers purchased wood from Lumber Liquidators and had it installed in their homes. They all allege that, at the time that they bought the wood, it was represented as being in compliance with both the Lacey Act and formaldehyde standards. The three plaintiffs allege that they were entirely dependent upon Lumber Liquidators’s representation of the wood and that they would not have purchased it if they had known that the wood might contain unsafe levels of formaldehyde.
The consumers’ lawsuit has been filed on behalf of everyone in the United States “who purchased and installed wood flooring from Lumber Liquidators Holdings, Inc., either directly or through an agent, that was sourced, processed, or manufactured in China”.
While lawsuits have become increasingly common in today’s society, they have grown no less costly. Because of the cost and time consuming nature of lawsuits, plaintiffs should be advised to thoroughly consider every line of their contracts, as well as the law, before taking a person or company to court. In a recent case handled by the Seventh Circuit Court of Appeals, Martha Schilke either failed to thoroughly read her mortgage contract, or she failed to fully understand it. Either way, the result was much time spent in court that could have been avoided.
Schilke purchased a town house in 2006 using a mortgage from Wachovia Mortgage, FSB. One of the conditions of her mortgage was that Schilke buy and maintain insurance on her property. If, at any point, she failed to do so, the contract stipulated that Wachovia had the right to purchase insurance on her behalf and charge her for the premium. The contract even went so far as to warn Schilke that, due to fewer insurance options, insurance coverage bought by them would likely be at a much higher premium and less coverage than insurance Schilke could buy on her own.
The contract further stated that “[i]f at any time during the life of the loan, a policy is cancelled or replaced or an insurance agent is substituted, we must receive written evidence of the insurance and written evidence of the substitution of the insurance agent. Written evidence of insurance is defined as: a copy of the reinstatement notice for the cancelled policy or a copy of the replacement policy. … If we do not receive such evidence prior to the termination date of the previous coverage, we may at our sole option, obtain an insurance policy for our benefit only, which would not protect your interest in the property or the contents. We would charge the premium due in under such a policy to your loan and the loan payment would increase accordingly.”
In January of 2008, Schilke purchased insurance for her property. In May of that same year, Wachovia sent her a notice that her policy had ended on April 8. The letter requested that Schilke provide proof of insurance within 14 days. She never replied. Wachovia sent Schilke another letter in June, once again requesting proof of insurance and notifying her that it had acquired temporary insurance coverage through American Security Insurance (ASI). Enclosed with the letter was an “Illinois Notice of Placement Insurance” in which Wachovia described the terms of the temporary insurance coverage and informed Schilke that she was responsible for the cost. The letter further stated that, if Schilke could provide proof of insurance, Wachovia would cancel the temporary insurance coverage and refund any premiums paid by Schilke. It also stated that, in the event that Schilke failed to provide proof of insurance in the next 30 days, Wachovia would cancel the temporary insurance and replace it with a 12-month insurance policy, for which Schilke would be charged.
In July 2008, Wachovia wrote to Schilke to inform her that it had purchased a 12-month insurance policy on her mortgaged property and of the cost of that coverage. One year later, Schilke filed a class action lawsuit, on behalf of herself and others similarly situated, against Wachovia and ASI for allegedly engaging in deceptive practices by failing to disclose that Wachovia was receiving “kickbacks” from ASI.
Wachovia and ASI moved to dismiss the motion and the district court granted it.
Schilke then sought leave to file an amended complaint in which she added claims for breach of contract against both Wachovia and ASI and “clarified” that her claim under the Consumer Fraud Act was based on allegations that Wachovia’s conduct was both “deceptive” and “unfair” as defined by the Act. The district court rejected the proposed amendment, concluding that Schilke’s “clarification” of her amendment did not change the fact that she did not have a claim under the Act.
Schilke then submitted another amended complaint. In this version, she proposed to add Assurant, Inc., ASI’s parent company, as a defendant. She also proposed to add claims for conspiracy, aiding and abetting, acting “in concert”, and “intentional interference”. The judge denied leave to amend the complaint, stating that none of the changes significantly changed the allegations in the complaint. Schilke appealed and the case moved to the Seventh Circuit Court of Appeals.
As to Schilke’s claims under the Consumer Fraud Act, the Act prohibits any “unfair” or “deceptive” business practices to be used by a person or entity in order to gain an unfair advantage. The Act defines these terms as including “the use or employment of any deception, fraud, false pretense, false promise, misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon the concealment, suppression, or omission”. The court found that, due to the contract provided by Wachovia, as well as its notices and correspondence to Schilke, the company had provided sufficient evidence that it had not violated the Consumer Fraud Act.
Schilke tried to claim that, even if Wachovia’s business practices were not deceptive, they were unfair because they “coerced” her into buying insurance through them. She backed this statement by saying that, had she refused to pay for the insurance through Wachovia, or failed to make a payment on her mortgage, Wachovia would have cancelled her mortgage, therefore she was “coerced” into buying the more expensive insurance. The court, however, pointed out that Wachovia had provided plenty of chances for Schilke to purchase cheaper insurance and, since having insurance was always a part of the legal contract, the court denied these allegations.
Because Wachovia received a commission from ASI for purchasing insurance on one of its properties, Schilke called it a “kickback” and claimed that it was unlawful. However, a “kickback” is defined as a bribe or payment which might be used to divide loyalties. This was never the case because Wachovia was not acting on Schilke’s behalf. Instead, the bank was merely acting to protect its own interests in the property it had purchased, for which Schilke was paying them back. Such a commission is fully within the limits of the law.
The Seventh Circuit Court of Appeals therefore upheld the ruling of the district court and dismissed the case.
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NY Attorney General sues Trump University for alleged consumer fraud. Our Chicago consumer fraud and class action lawyers have successfully pursued class actions against trade schools in Illinois that have misrepresented the percentage of graduates who have obtained jobs in the field or omitted to disclose that very few graduates obtain jobs in the field. Illinois requires trade schools to disclose the percentage of graduates who obtain jobs in the field.
Our law firm is pursuing class actions and putative class actions against for profit vocational schools in the Chicago area. We have interviewed many students of for profit universities, colleges and vocational schools who believe that various for profit colleges and Universities have cheated them along with the government in getting the students to borrow money with government backed loans for essentially a worthless education.
A federal judge denied most of a motion to dismiss brought by multiple banks in a consolidated case alleging overdraft fee fraud. In re Checking Account Overdraft Litigation, 694 F.Supp.2d 1302 (S.D. Fla. 2010). The Judicial Panel on Multidistrict Litigation (JPML) consolidated multiple claims into a single matter in the Southern District of Florida in order to deal efficiently with common pretrial matters. The plaintiffs asserted causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing (“GFFD covenant”), and many individual causes asserted common law breach of contract claims and state law consumer protection claims. The defendants filed an omnibus motion to dismiss, which the trial court granted in part and denied in larger part. The court dismissed claims under certain state consumer statutes, as well as claims based on the laws of states in which no plaintiffs lived.
The central issue of the litigation was the ordering of ATM transactions from highest to lowest, regardless of the order in which the account holder performed the transaction. This allegedly reduced the account holder’s total account balance more quickly, garnering more overdraft fees for the defendants. At the time the court rendered its order on the omnibus motion to dismiss, the litigation consisted of fifteen separate complaints, each brought against an individual bank. All of the fifteen complaints pending at the time of the court’s order involved breach of GFFD covenant claims. Five complaints were filed in California as putative class actions on behalf of California customers. Eight complaints were filed outside California, putatively on behalf of nationwide classes excluding California. One complaint was filed by a California resident and sought to represent a nationwide class. The final complaint was filed by a Washington resident on behalf of a class of Washington customers. According to the JPML, the consolidated litigation has involved one hundred separate complaints since 2009, with forty-four still involved as of March 5, 2013.
A federal court allowed most causes to proceed in a putative class action against a bank for allegedly fraudulent overdraft fees. White, et al v. Wachovia Bank, N.A., No. 1:08-cv-1007, order (N.D. Ga., Jul. 2, 2008). The plaintiffs, who alleged that the bank had recorded transactions out of chronological order to maximize overdraft fee liability, claimed violations of state deceptive trade practice laws and several claims related to breach of contract. The court denied the defendant bank’s motion to dismiss as to all but two of the plaintiffs’ claims.
The two lead plaintiffs opened a joint checking account with Wachovia Bank in 2007. They signed a Deposit Agreement that stated that the bank could pay checks and other items in any order it chose, even if it resulted in an overdraft. It also stated that the bank could impose overdraft charges if payment of any single item exceeded the balance in the account. The plaintiffs alleged in their lawsuit that Wachovia ordered its posting of transactions in a way that would cause their account to incur overdraft fees, even when they had sufficient funds to pay the items. They also alleged that the bank imposed overdraft fees when no overdraft had occurred.
The lawsuit, originally filed in a Georgia state court in February 2008, asserted violations of the Georgia Fair Business Practices Act (FBPA), O.C.G.A. §§ 10-1-390 et seq., and breach of the duty of good faith. The plaintiffs also claimed that the clause of the Agreement related to the ordering of transaction was unconscionable, that the bank had engaged in trover and conversion, and that it had been unjustly enriched. The defendant removed the case to federal court under the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d)(2), which allows defendants to remove certain class actions to federal court. It then moved to dismiss all claims under Federal Rule of Civil Procedure 12(b)(6), which allows a court to dismiss a lawsuit that “fail[s] to state a claim upon which relief can be granted.” To defeat such a motion, a plaintiff must show a plausible factual basis for their claims.