InfoBytes, March 13, 2009
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Topics in this issue:
- Federal Issues
- State Issues
- Courts
- Firm News
- Miscellany
- Mortgages
- Consumer Finance
- Litigation
- E-Financial Services
- Privacy/Data Security
- Credit Cards
Federal Issues
HUD Further Delays Implementation of RESPA “Required Use” Provision. On March 10, the U.S. Department of Housing and Urban Development (HUD) announced that it will further delay the effective date of the new definition of “required use,” as revised by HUD’s November 17, 2008 final rule amending Real Estate Settlement Procedures Act regulations, until July 16, 2009. The revised definition would effectively prohibit non-settlement service providers from providing discounts to consumers for using settlement service provider affiliates. The revised definition was initially set to become effective on January 16, 2009. However, on January 15, 2009, HUD delayed the effective date until April 16, 2009. HUD is now further delaying the effective date to July 16, 2009, and soliciting comments on withdrawing the revised definition from the November 17, 2008 final rule. HUD must receive new comments regarding the definition by April 9, 2009. For a copy of the Federal Register notice, please see http://www.buckleykolar.com/Fed_Register_Mar_10_09.pdf.
Fed Proposes Amendments to Reg Z for Private Student Loans. On March 11, the Federal Reserve Board proposed amendments to Regulation Z, the regulations implementing the Truth in Lending Act, to revise the disclosure requirements for private education loans. The proposed rules will implement aspects of the Higher Education Opportunity Act (HEOA), which was enacted on August 14, 2008. Under the proposed rules, creditors of private student loans would be required to provide disclosures regarding loan terms and features with the application, and creditors would be required to disclose information about federal student loan programs that may be less costly. The proposed rules also add disclosure requirements at loan approval and at consummation. (Proposed model disclosure forms are included in the proposed rules.) The disclosure requirements would apply only to private loans made for post-secondary educational expenses – not to loans of open-end credit, real estate-secured loans, and loans made, insured, or guaranteed by the federal government under Title IV of the Higher Education Act of 1965. Additionally, the proposed rules would permit creditors to make disclosures to consumers in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign). However, the new rules modify E-Sign’s applicability to certain types of disclosures. For example, the disclosures required by § 226.38(a) and § 226.39(e) of the rules could be provided to the consumer in electronic form on or with an application or solicitation without regard to the consumer consent or other provisions of E-Sign. Instead of E-Sign, proposed comment 37(c)(2)-1 would contain guidance on the manner in which these disclosures could be provided in electronic form. Electronic disclosures would be deemed to be on or with an application or solicitation if they (i) automatically appear on the screen when the application or solicitation reply form appears, (ii) are located on the same web “page” as the application or solicitation reply form and the application or reply form contains a clear and conspicuous reference to the location and content of the disclosures, or (iii) are posted on a web site and the application or solicitation reply form is linked to the disclosures in a manner that prevents the consumer from by-passing the disclosures before submitting the application or reply form. Such an approach would make the proposed rules consistent with the rules for electronic disclosures for credit and charge card applications under comment 5a(a)(2)-1.ii. Public comments on the proposed rules are due within 60 days after publication in the Federal Register, which is forthcoming. For a copy of the proposed rules, please see http://www.buckleykolar.com/Mar_09_Reg_Z.pdf. For a copy of the press release, please see http://www.federalreserve.gov/newsevents/press/bcreg/20090311a.htm.
State Issues
California Regulator Issues Mortgage Servicer Survey Results. On March 9, the California Department of Corporations issued its most-recent mortgage servicer survey results, which reflect data collected as of December 2008. The survey results show, among other things, that more loan modifications were reported for December 2008 (18,410) than for any other month since reporting began in 2007. For a copy of the survey results, please see http://www.corp.ca.gov/press/news/spl/LMS1208.pdf.
Courts
Seventh Circuit Holds Collection Letter Does Not Violate FDCPA. On March 4, the U.S. Court of Appeals for the Seventh Circuit held that a subsequent owner of overdue credit card debts does not violate the Fair Debt Collection Practices Act (FDCPA) by sending a collection letter that includes interest accrued while the debt is held by an original creditor in the calculation of the “amount due,” and includes subsequently accrued interest as “interest due.” Hahn v. Triumph Partnerships LLC, No. 08-152, 2009 WL 529562 (7th Cir. Mar. 4, 2009). In Hahn, the defendant purchased the plaintiff’s credit card debt totaling $1,051.91. Thereafter, an affiliate of the defendant sent a collection letter to the plaintiff that identified a total “amount due” ($1,134.55) and an “interest charge” ($82.64). The plaintiff argued that the letter was “false, deceptive, or misleading,” in violation of the FDCPA, because the “interest charge” reflected only the interest accrued after the defendant purchased the debt, and that the “amount due” included interest charged by the original creditor. The court rejected this argument. Following its decision in Barnes v. Advanced Call Center Technologies, LLC, 493 F.3d 838 (7th Cir. 2007), the court held that a debt collector “need not break out principal and interest; it is enough to tell the debtor the bottom line.” Moreover, any distinction between “principal” and “interest” is not a “material” one for the purposes of the FDCPA. The court reasoned that separating the amount owed into an “interest charge” and an “amount due” merely clarifies why an amount requested by a debt collector is higher than the amount from the last statement provided by the original creditor. Finally, the court held that finding whether the letter was “misleading” to consumers would require survey evidence, which was not provided. For a copy of the opinion, please see http://www.buckleykolar.com/Hahn_v_Triumph.pdf.
California Federal Court Holds Online Forum Selection Clause Not Enforceable. On February 25, the U.S. District Court for the Southern District of California held that a plaintiff must show that a defendant viewed or “used” its website in order to enforce a forum selection provision. Fractional Villas, Inc. v. Tahoe Clubhouse, No. 08-cv-1396 (S.D. Cal. Feb. 25, 2009). In Fractional Villas, the plaintiff sued, among other parties, a company called WebResults and an individual web designer, Larry Draut, for copyright infringement and federal and state unfair competition violations based on the allegation that Draut copied extensive portions of the plaintiff’s website verbatim without permission to create the plaintiff’s competitor’s website. The plaintiff argued that, because Draut, in creating the website, used extensive material from plaintiff’s website, he must have visited the site, and therefore consented to its forum selection provision. The plaintiffs sued WebResults because they alleged that Draut worked for, or was connected with, the company. WebResults moved to dismiss for lack of venue, stating that they had no connection to Draut, and therefore could not have assented to venue in California. The court agreed. It found that, although a court can hold that a party’s use of a website may be sufficient to give rise to an inference of assent to the terms of use on that website, the plaintiff must be able to show that the defendant used the website. Here, the plaintiff was not able to prove either that Draut was an agent of WebResults, or that WebResults itself visited the website. Consequently, WebResults was not subject to the forum selection clause. Having found an absence of assent to forum selection, the court also found that neither venue nor jurisdiction in California was proper and granted WebResults’ motion to dismiss. For a copy of the opinion, please see http://www.buckleykolar.com/Fractional_v_Tahoe.pdf.
Texas Federal Court Holds Clickwrap Agreement Binding. On February 17, the U.S. District Court for the Eastern District of Texas ruled that a “clickwrap” agreement was binding on a plaintiff who claimed to have never read or reviewed the terms of the agreement. Via Viente Taiwan, L.P. v. United Parcel Service, Inc., No. 4:08-cv-301, 2009 WL 398729 (E.D. Tex. Feb. 17, 2009). In Via Viente, the plaintiff hired the defendant, United Parcel Service, Inc. (UPS), to ship its product overseas, and the parties entered into a “Carrier Agreement.” As part of the agreement, UPS installed shipping software on the plaintiff’s computers, and therefore clicked “agree” on behalf of the plaintiff to the shipping software’s terms and conditions, including a forum selection clause. The plaintiff argued that there was no “meeting of the minds” as to the clickwrap agreement, because it did not review or agree to its terms and conditions. The court rejected this argument, stating that the plaintiff should have known that installing software necessitates terms that must be agreed to, especially for a “sophisticated company which boasts international operations.” The court also found it difficult to believe that the plaintiff would have allowed a technician unsupervised access to its computers and at the same time be completely unaware that the use of the UPS software required acceptance of the clickwrap agreement. Finally, the court found that it would be inequitable to allow the plaintiff to benefit from certain portions of the contract while disavowing others. As a result, the court granted the defendant’s motion to transfer venue pursuant to the forum selection clause of the clickwrap agreement. For a copy of the opinion, please see http://www.buckleykolar.com/Via_Viente_v_UPS.pdf.
Maryland Federal Court Denies Class Certification in FACTA Truncation Case. On March 5, the U.S. District Court for the District of Maryland denied plaintiffs’ motion to certify a class action suit for alleged violations of the Fair and Accurate Credit Transactions Act (FACTA). Stillmock v. Weis Markets, Inc., No. MJG-07-1342, 2009 WL 595642 (D. Md. Mar. 5, 2009). In Stillmock, the plaintiffs alleged that the defendant willfully violated § 1681c(g) of FACTA by providing customers with receipts containing more than the last five digits of their credit or debit cards. The plaintiffs moved to certify a class consisting of all individuals in the United States who received such receipts and did not suffer actual damages due to identity theft. Considering the plaintiffs’ motion, the court determined that the putative class satisfied FRCP Rule 23(a). Next, the court analyzed whether the class satisfied FRCP Rule 23(b). Because the plaintiffs did not seek certification under Rule 23(b)(1), and because injunctive or declaratory relief was inappropriate under Rule23(b)(2), the court focused its analysis on whether certification was appropriate under Rule 23(b)(3). Ultimately, the court determined that the plaintiffs could not satisfy this standard because (i) certification would not fulfill the “predominance” requirement because FACTA’s damages provision would require a jury to make individualized damages determinations for every class member, and (ii) certification would not fulfill the “superiority” requirement because, if the plaintiffs prevailed on their claim, others could file suits in more convenient courts, and because the defendant would likely be collaterally estopped from denying willfulness in such actions. As a result, the court denied the plaintiffs’ motion for class certification. For a copy of the opinion, please see http://www.buckleykolar.com/Stillmock_v_Weis.pdf.
Firm News
Margo Tank will be speaking at the MBA Technology in Mortgage Banking Conference/Expo March 15-18 in Las Vegas, NV on eMortgage legal and risk managements issues.
Colgate Selden participated in a webinar sponsored by the National Association of Federal Credit Unions regarding the RESPA Reform Rule on March 4. Mr. Selden’s presentation was entitled “Real Estate Settlement Overhaul: Complying with RESPA Reform.”
Joe Kolar gave speech on RESPA at the Old Republic National Title Insurance Company 2009 Annual Seminar in Columbus, Ohio on March 10.
Miscellany
FTC Announces Speakers for Upcoming Data Security Conference. On March 9, the Federal Trade Commission (FTC) announced the scheduled speakers for a conference titled “Securing Personal Data in the Global Economy,” which will take place March 16-17 in Washington, D.C. The conference will include a series of moderated panel discussions regarding various data security issues. For a copy of the press release, please see http://www.ftc.gov/opa/2009/03/personaldata.shtm.
Mortgages
HUD Further Delays Implementation of RESPA “Required Use” Provision. On March 10, the U.S. Department of Housing and Urban Development (HUD) announced that it will further delay the effective date of the new definition of “required use,” as revised by HUD’s November 17, 2008 final rule amending Real Estate Settlement Procedures Act regulations, until July 16, 2009. The revised definition would effectively prohibit non-settlement service providers from providing discounts to consumers for using settlement service provider affiliates. The revised definition was initially set to become effective on January 16, 2009. However, on January 15, 2009, HUD delayed the effective date until April 16, 2009. HUD is now further delaying the effective date to July 16, 2009, and soliciting comments on withdrawing the revised definition from the November 17, 2008 final rule. HUD must receive new comments regarding the definition by April 9, 2009. For a copy of the Federal Register notice, please see http://www.buckleykolar.com/Fed_Register_Mar_10_09.pdf.
California Regulator Issues Mortgage Servicer Survey Results. On March 9, the California Department of Corporations issued its most-recent mortgage servicer survey results, which reflect data collected as of December 2008. The survey results show, among other things, that more loan modifications were reported for December 2008 (18,410) than for any other month since reporting began in 2007. For a copy of the survey results, please see http://www.corp.ca.gov/press/news/spl/LMS1208.pdf.
Consumer Finance
Fed Proposes Amendments to Reg Z for Private Student Loans. On March 11, the Federal Reserve Board proposed amendments to Regulation Z, the regulations implementing the Truth in Lending Act, to revise the disclosure requirements for private education loans. The proposed rules will implement aspects of the Higher Education Opportunity Act (HEOA), which was enacted on August 14, 2008. Under the proposed rules, creditors of private student loans would be required to provide disclosures regarding loan terms and features with the application, and creditors would be required to disclose information about federal student loan programs that may be less costly. The proposed rules also add disclosure requirements at loan approval and at consummation. (Proposed model disclosure forms are included in the proposed rules.) The disclosure requirements would apply only to private loans made for post-secondary educational expenses – not to loans of open-end credit, real estate-secured loans, and loans made, insured, or guaranteed by the federal government under Title IV of the Higher Education Act of 1965. Additionally, the proposed rules would permit creditors to make disclosures to consumers in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign). However, the new rules modify E-Sign’s applicability to certain types of disclosures. For example, the disclosures required by § 226.38(a) and § 226.39(e) of the rules could be provided to the consumer in electronic form on or with an application or solicitation without regard to the consumer consent or other provisions of E-Sign. Instead of E-Sign, proposed comment 37(c)(2)-1 would contain guidance on the manner in which these disclosures could be provided in electronic form. Electronic disclosures would be deemed to be on or with an application or solicitation if they (i) automatically appear on the screen when the application or solicitation reply form appears, (ii) are located on the same web “page” as the application or solicitation reply form and the application or reply form contains a clear and conspicuous reference to the location and content of the disclosures, or (iii) are posted on a web site and the application or solicitation reply form is linked to the disclosures in a manner that prevents the consumer from by-passing the disclosures before submitting the application or reply form. Such an approach would make the proposed rules consistent with the rules for electronic disclosures for credit and charge card applications under comment 5a(a)(2)-1.ii. Public comments on the proposed rules are due within 60 days after publication in the Federal Register, which is forthcoming. For a copy of the proposed rules, please see http://www.buckleykolar.com/Mar_09_Reg_Z.pdf. For a copy of the press release, please see http://www.federalreserve.gov/newsevents/press/bcreg/20090311a.htm.
Seventh Circuit Holds Collection Letter Does Not Violate FDCPA. On March 4, the U.S. Court of Appeals for the Seventh Circuit held that a subsequent owner of overdue credit card debts does not violate the Fair Debt Collection Practices Act (FDCPA) by sending a collection letter that includes interest accrued while the debt is held by an original creditor in the calculation of the “amount due,” and includes subsequently accrued interest as “interest due.” Hahn v. Triumph Partnerships LLC, No. 08-152, 2009 WL 529562 (7th Cir. Mar. 4, 2009). In Hahn, the defendant purchased the plaintiff’s credit card debt totaling $1,051.91. Thereafter, an affiliate of the defendant sent a collection letter to the plaintiff that identified a total “amount due” ($1,134.55) and an “interest charge” ($82.64). The plaintiff argued that the letter was “false, deceptive, or misleading,” in violation of the FDCPA, because the “interest charge” reflected only the interest accrued after the defendant purchased the debt, and that the “amount due” included interest charged by the original creditor. The court rejected this argument. Following its decision in Barnes v. Advanced Call Center Technologies, LLC, 493 F.3d 838 (7th Cir. 2007), the court held that a debt collector “need not break out principal and interest; it is enough to tell the debtor the bottom line.” Moreover, any distinction between “principal” and “interest” is not a “material” one for the purposes of the FDCPA. The court reasoned that separating the amount owed into an “interest charge” and an “amount due” merely clarifies why an amount requested by a debt collector is higher than the amount from the last statement provided by the original creditor. Finally, the court held that finding whether the letter was “misleading” to consumers would require survey evidence, which was not provided. For a copy of the opinion, please see http://www.buckleykolar.com/Hahn_v_Triumph.pdf.
Litigation
Seventh Circuit Holds Collection Letter Does Not Violate FDCPA. On March 4, the U.S. Court of Appeals for the Seventh Circuit held that a subsequent owner of overdue credit card debts does not violate the Fair Debt Collection Practices Act (FDCPA) by sending a collection letter that includes interest accrued while the debt is held by an original creditor in the calculation of the “amount due,” and includes subsequently accrued interest as “interest due.” Hahn v. Triumph Partnerships LLC, No. 08-152, 2009 WL 529562 (7th Cir. Mar. 4, 2009). In Hahn, the defendant purchased the plaintiff’s credit card debt totaling $1,051.91. Thereafter, an affiliate of the defendant sent a collection letter to the plaintiff that identified a total “amount due” ($1,134.55) and an “interest charge” ($82.64). The plaintiff argued that the letter was “false, deceptive, or misleading,” in violation of the FDCPA, because the “interest charge” reflected only the interest accrued after the defendant purchased the debt, and that the “amount due” included interest charged by the original creditor. The court rejected this argument. Following its decision in Barnes v. Advanced Call Center Technologies, LLC, 493 F.3d 838 (7th Cir. 2007), the court held that a debt collector “need not break out principal and interest; it is enough to tell the debtor the bottom line.” Moreover, any distinction between “principal” and “interest” is not a “material” one for the purposes of the FDCPA. The court reasoned that separating the amount owed into an “interest charge” and an “amount due” merely clarifies why an amount requested by a debt collector is higher than the amount from the last statement provided by the original creditor. Finally, the court held that finding whether the letter was “misleading” to consumers would require survey evidence, which was not provided. For a copy of the opinion, please see http://www.buckleykolar.com/Hahn_v_Triumph.pdf.
California Federal Court Holds Online Forum Selection Clause Not Enforceable. On February 25, the U.S. District Court for the Southern District of California held that a plaintiff must show that a defendant viewed or “used” its website in order to enforce a forum selection provision. Fractional Villas, Inc. v. Tahoe Clubhouse, No. 08-cv-1396 (S.D. Cal. Feb. 25, 2009). In Fractional Villas, the plaintiff sued, among other parties, a company called WebResults and an individual web designer, Larry Draut, for copyright infringement and federal and state unfair competition violations based on the allegation that Draut copied extensive portions of the plaintiff’s website verbatim without permission to create the plaintiff’s competitor’s website. The plaintiff argued that, because Draut, in creating the website, used extensive material from plaintiff’s website, he must have visited the site, and therefore consented to its forum selection provision. The plaintiffs sued WebResults because they alleged that Draut worked for, or was connected with, the company. WebResults moved to dismiss for lack of venue, stating that they had no connection to Draut, and therefore could not have assented to venue in California. The court agreed. It found that, although a court can hold that a party’s use of a website may be sufficient to give rise to an inference of assent to the terms of use on that website, the plaintiff must be able to show that the defendant used the website. Here, the plaintiff was not able to prove either that Draut was an agent of WebResults, or that WebResults itself visited the website. Consequently, WebResults was not subject to the forum selection clause. Having found an absence of assent to forum selection, the court also found that neither venue nor jurisdiction in California was proper and granted WebResults’ motion to dismiss. For a copy of the opinion, please see http://www.buckleykolar.com/Fractional_v_Tahoe.pdf.
Texas Federal Court Holds Clickwrap Agreement Binding. On February 17, the U.S. District Court for the Eastern District of Texas ruled that a “clickwrap” agreement was binding on a plaintiff who claimed to have never read or reviewed the terms of the agreement. Via Viente Taiwan, L.P. v. United Parcel Service, Inc., No. 4:08-cv-301, 2009 WL 398729 (E.D. Tex. Feb. 17, 2009). In Via Viente, the plaintiff hired the defendant, United Parcel Service, Inc. (UPS), to ship its product overseas, and the parties entered into a “Carrier Agreement.” As part of the agreement, UPS installed shipping software on the plaintiff’s computers, and therefore clicked “agree” on behalf of the plaintiff to the shipping software’s terms and conditions, including a forum selection clause. The plaintiff argued that there was no “meeting of the minds” as to the clickwrap agreement, because it did not review or agree to its terms and conditions. The court rejected this argument, stating that the plaintiff should have known that installing software necessitates terms that must be agreed to, especially for a “sophisticated company which boasts international operations.” The court also found it difficult to believe that the plaintiff would have allowed a technician unsupervised access to its computers and at the same time be completely unaware that the use of the UPS software required acceptance of the clickwrap agreement. Finally, the court found that it would be inequitable to allow the plaintiff to benefit from certain portions of the contract while disavowing others. As a result, the court granted the defendant’s motion to transfer venue pursuant to the forum selection clause of the clickwrap agreement. For a copy of the opinion, please see http://www.buckleykolar.com/Via_Viente_v_UPS.pdf.
Maryland Federal Court Denies Class Certification in FACTA Truncation Case. On March 5, the U.S. District Court for the District of Maryland denied plaintiffs’ motion to certify a class action suit for alleged violations of the Fair and Accurate Credit Transactions Act (FACTA). Stillmock v. Weis Markets, Inc., No. MJG-07-1342, 2009 WL 595642 (D. Md. Mar. 5, 2009). In Stillmock, the plaintiffs alleged that the defendant willfully violated § 1681c(g) of FACTA by providing customers with receipts containing more than the last five digits of their credit or debit cards. The plaintiffs moved to certify a class consisting of all individuals in the United States who received such receipts and did not suffer actual damages due to identity theft. Considering the plaintiffs’ motion, the court determined that the putative class satisfied FRCP Rule 23(a). Next, the court analyzed whether the class satisfied FRCP Rule 23(b). Because the plaintiffs did not seek certification under Rule 23(b)(1), and because injunctive or declaratory relief was inappropriate under Rule23(b)(2), the court focused its analysis on whether certification was appropriate under Rule 23(b)(3). Ultimately, the court determined that the plaintiffs could not satisfy this standard because (i) certification would not fulfill the “predominance” requirement because FACTA’s damages provision would require a jury to make individualized damages determinations for every class member, and (ii) certification would not fulfill the “superiority” requirement because, if the plaintiffs prevailed on their claim, others could file suits in more convenient courts, and because the defendant would likely be collaterally estopped from denying willfulness in such actions. As a result, the court denied the plaintiffs’ motion for class certification. For a copy of the opinion, please see http://www.buckleykolar.com/Stillmock_v_Weis.pdf.
E-Financial Services
Fed Proposes Amendments to Reg Z for Private Student Loans. On March 11, the Federal Reserve Board proposed amendments to Regulation Z, the regulations implementing the Truth in Lending Act, to revise the disclosure requirements for private education loans. The proposed rules will implement aspects of the Higher Education Opportunity Act (HEOA), which was enacted on August 14, 2008. Under the proposed rules, creditors of private student loans would be required to provide disclosures regarding loan terms and features with the application, and creditors would be required to disclose information about federal student loan programs that may be less costly. The proposed rules also add disclosure requirements at loan approval and at consummation. (Proposed model disclosure forms are included in the proposed rules.) The disclosure requirements would apply only to private loans made for post-secondary educational expenses – not to loans of open-end credit, real estate-secured loans, and loans made, insured, or guaranteed by the federal government under Title IV of the Higher Education Act of 1965. Additionally, the proposed rules would permit creditors to make disclosures to consumers in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign). However, the new rules modify E-Sign’s applicability to certain types of disclosures. For example, the disclosures required by § 226.38(a) and § 226.39(e) of the rules could be provided to the consumer in electronic form on or with an application or solicitation without regard to the consumer consent or other provisions of E-Sign. Instead of E-Sign, proposed comment 37(c)(2)-1 would contain guidance on the manner in which these disclosures could be provided in electronic form. Electronic disclosures would be deemed to be on or with an application or solicitation if they (i) automatically appear on the screen when the application or solicitation reply form appears, (ii) are located on the same web “page” as the application or solicitation reply form and the application or reply form contains a clear and conspicuous reference to the location and content of the disclosures, or (iii) are posted on a web site and the application or solicitation reply form is linked to the disclosures in a manner that prevents the consumer from by-passing the disclosures before submitting the application or reply form. Such an approach would make the proposed rules consistent with the rules for electronic disclosures for credit and charge card applications under comment 5a(a)(2)-1.ii. Public comments on the proposed rules are due within 60 days after publication in the Federal Register, which is forthcoming. For a copy of the proposed rules, please see http://www.buckleykolar.com/Mar_09_Reg_Z.pdf. For a copy of the press release, please see http://www.federalreserve.gov/newsevents/press/bcreg/20090311a.htm.
California Federal Court Holds Online Forum Selection Clause Not Enforceable. On February 25, the U.S. District Court for the Southern District of California held that a plaintiff must show that a defendant viewed or “used” its website in order to enforce a forum selection provision. Fractional Villas, Inc. v. Tahoe Clubhouse, No. 08-cv-1396 (S.D. Cal. Feb. 25, 2009). In Fractional Villas, the plaintiff sued, among other parties, a company called WebResults and an individual web designer, Larry Draut, for copyright infringement and federal and state unfair competition violations based on the allegation that Draut copied extensive portions of the plaintiff’s website verbatim without permission to create the plaintiff’s competitor’s website. The plaintiff argued that, because Draut, in creating the website, used extensive material from plaintiff’s website, he must have visited the site, and therefore consented to its forum selection provision. The plaintiffs sued WebResults because they alleged that Draut worked for, or was connected with, the company. WebResults moved to dismiss for lack of venue, stating that they had no connection to Draut, and therefore could not have assented to venue in California. The court agreed. It found that, although a court can hold that a party’s use of a website may be sufficient to give rise to an inference of assent to the terms of use on that website, the plaintiff must be able to show that the defendant used the website. Here, the plaintiff was not able to prove either that Draut was an agent of WebResults, or that WebResults itself visited the website. Consequently, WebResults was not subject to the forum selection clause. Having found an absence of assent to forum selection, the court also found that neither venue nor jurisdiction in California was proper and granted WebResults’ motion to dismiss. For a copy of the opinion, please see http://www.buckleykolar.com/Fractional_v_Tahoe.pdf.
Texas Federal Court Holds Clickwrap Agreement Binding. On February 17, the U.S. District Court for the Eastern District of Texas ruled that a “clickwrap” agreement was binding on a plaintiff who claimed to have never read or reviewed the terms of the agreement. Via Viente Taiwan, L.P. v. United Parcel Service, Inc., No. 4:08-cv-301, 2009 WL 398729 (E.D. Tex. Feb. 17, 2009). In Via Viente, the plaintiff hired the defendant, United Parcel Service, Inc. (UPS), to ship its product overseas, and the parties entered into a “Carrier Agreement.” As part of the agreement, UPS installed shipping software on the plaintiff’s computers, and therefore clicked “agree” on behalf of the plaintiff to the shipping software’s terms and conditions, including a forum selection clause. The plaintiff argued that there was no “meeting of the minds” as to the clickwrap agreement, because it did not review or agree to its terms and conditions. The court rejected this argument, stating that the plaintiff should have known that installing software necessitates terms that must be agreed to, especially for a “sophisticated company which boasts international operations.” The court also found it difficult to believe that the plaintiff would have allowed a technician unsupervised access to its computers and at the same time be completely unaware that the use of the UPS software required acceptance of the clickwrap agreement. Finally, the court found that it would be inequitable to allow the plaintiff to benefit from certain portions of the contract while disavowing others. As a result, the court granted the defendant’s motion to transfer venue pursuant to the forum selection clause of the clickwrap agreement. For a copy of the opinion, please see http://www.buckleykolar.com/Via_Viente_v_UPS.pdf.
Privacy/Data Security
FTC Announces Speakers for Upcoming Data Security Conference. On March 9, the Federal Trade Commission (FTC) announced the scheduled speakers for a conference titled “Securing Personal Data in the Global Economy,” which will take place March 16-17 in Washington, D.C. The conference will include a series of moderated panel discussions regarding various data security issues. For a copy of the press release, please see http://www.ftc.gov/opa/2009/03/personaldata.shtm.
Maryland Federal Court Denies Class Certification in FACTA Truncation Case. On March 5, the U.S. District Court for the District of Maryland denied plaintiffs’ motion to certify a class action suit for alleged violations of the Fair and Accurate Credit Transactions Act (FACTA). Stillmock v. Weis Markets, Inc., No. MJG-07-1342, 2009 WL 595642 (D. Md. Mar. 5, 2009). In Stillmock, the plaintiffs alleged that the defendant willfully violated § 1681c(g) of FACTA by providing customers with receipts containing more than the last five digits of their credit or debit cards. The plaintiffs moved to certify a class consisting of all individuals in the United States who received such receipts and did not suffer actual damages due to identity theft. Considering the plaintiffs’ motion, the court determined that the putative class satisfied FRCP Rule 23(a). Next, the court analyzed whether the class satisfied FRCP Rule 23(b). Because the plaintiffs did not seek certification under Rule 23(b)(1), and because injunctive or declaratory relief was inappropriate under Rule23(b)(2), the court focused its analysis on whether certification was appropriate under Rule 23(b)(3). Ultimately, the court determined that the plaintiffs could not satisfy this standard because (i) certification would not fulfill the “predominance” requirement because FACTA’s damages provision would require a jury to make individualized damages determinations for every class member, and (ii) certification would not fulfill the “superiority” requirement because, if the plaintiffs prevailed on their claim, others could file suits in more convenient courts, and because the defendant would likely be collaterally estopped from denying willfulness in such actions. As a result, the court denied the plaintiffs’ motion for class certification. For a copy of the opinion, please see http://www.buckleykolar.com/Stillmock_v_Weis.pdf.
Credit Cards
Seventh Circuit Holds Collection Letter Does Not Violate FDCPA. On March 4, the U.S. Court of Appeals for the Seventh Circuit held that a subsequent owner of overdue credit card debts does not violate the Fair Debt Collection Practices Act (FDCPA) by sending a collection letter that includes interest accrued while the debt is held by an original creditor in the calculation of the “amount due,” and includes subsequently accrued interest as “interest due.” Hahn v. Triumph Partnerships LLC, No. 08-152, 2009 WL 529562 (7th Cir. Mar. 4, 2009). In Hahn, the defendant purchased the plaintiff’s credit card debt totaling $1,051.91. Thereafter, an affiliate of the defendant sent a collection letter to the plaintiff that identified a total “amount due” ($1,134.55) and an “interest charge” ($82.64). The plaintiff argued that the letter was “false, deceptive, or misleading,” in violation of the FDCPA, because the “interest charge” reflected only the interest accrued after the defendant purchased the debt, and that the “amount due” included interest charged by the original creditor. The court rejected this argument. Following its decision in Barnes v. Advanced Call Center Technologies, LLC, 493 F.3d 838 (7th Cir. 2007), the court held that a debt collector “need not break out principal and interest; it is enough to tell the debtor the bottom line.” Moreover, any distinction between “principal” and “interest” is not a “material” one for the purposes of the FDCPA. The court reasoned that separating the amount owed into an “interest charge” and an “amount due” merely clarifies why an amount requested by a debt collector is higher than the amount from the last statement provided by the original creditor. Finally, the court held that finding whether the letter was “misleading” to consumers would require survey evidence, which was not provided. For a copy of the opinion, please see http://www.buckleykolar.com/Hahn_v_Triumph.pdf.
Maryland Federal Court Denies Class Certification in FACTA Truncation Case. On March 5, the U.S. District Court for the District of Maryland denied plaintiffs’ motion to certify a class action suit for alleged violations of the Fair and Accurate Credit Transactions Act (FACTA). Stillmock v. Weis Markets, Inc., No. MJG-07-1342, 2009 WL 595642 (D. Md. Mar. 5, 2009). In Stillmock, the plaintiffs alleged that the defendant willfully violated § 1681c(g) of FACTA by providing customers with receipts containing more than the last five digits of their credit or debit cards. The plaintiffs moved to certify a class consisting of all individuals in the United States who received such receipts and did not suffer actual damages due to identity theft. Considering the plaintiffs’ motion, the court determined that the putative class satisfied FRCP Rule 23(a). Next, the court analyzed whether the class satisfied FRCP Rule 23(b). Because the plaintiffs did not seek certification under Rule 23(b)(1), and because injunctive or declaratory relief was inappropriate under Rule23(b)(2), the court focused its analysis on whether certification was appropriate under Rule 23(b)(3). Ultimately, the court determined that the plaintiffs could not satisfy this standard because (i) certification would not fulfill the “predominance” requirement because FACTA’s damages provision would require a jury to make individualized damages determinations for every class member, and (ii) certification would not fulfill the “superiority” requirement because, if the plaintiffs prevailed on their claim, others could file suits in more convenient courts, and because the defendant would likely be collaterally estopped from denying willfulness in such actions. As a result, the court denied the plaintiffs’ motion for class certification. For a copy of the opinion, please see http://www.buckleykolar.com/Stillmock_v_Weis.pdf.