Justia U.S. 3rd Circuit Court of Appeals Opinion Summaries

Articles Posted in Consumer Law
by
Adam saw advertisements for free samples of beauty products, which implied that she need only pay for shipping and handling. Adam ordered two free samples and purchased another item. She was charged $9.94 for shipping and $14.99 for the purchased item. Soon thereafter, Adam was unexpectedly charged $92.94, which resulted in an overdraft of her checking account. A company representative told Adam that “she had agreed" to pay the full amount if she kept the "free samples" and that Adam would need to return the items before refunds could be issued. Adam, not trusting the company, refused to return the items, then called her bank, which temporarily reversed the charge but ultimately reinstated it. Adam contends that her bank was misled by the “false-front scheme” and that the charge would have been reversed but for the defendants’ misrepresentations.Adam filed a putative class-action suit, alleging violations of (or conspiracy to violate or aiding and abetting violation of): multiple California laws; the Electronic Fund Transfer Act, 15 U.S.C. 1693–1693r; the RICO Act, 18 U.S.C. 1961–1968; and consumer laws. The Third Circuit reversed the dismissal of the suit. Adam has standing; she was not made whole by the refund offer; she has neither received a refund nor accepted any alternative. Defendants’ conduct could provide but-for causation for Adam’s financial harm and a restitution order would redress that harm. View "Adam v. Barone" on Justia Law

by
TitleMax provides vehicle loans at interest rates as high as 180%. The entire process occurs at a TitleMax brick-and-mortar location. The borrower receives “a check drawn on a bank outside of Pennsylvania,” The borrower grants TitleMax a security interest in the vehicle. TitleMax records its lien with the appropriate state authority. Borrowers can make payments from their home states. TitleMax does not have any offices, employees, agents, or brick-and-mortar stores and is not licensed as a lender in Pennsylvania. TitleMax claims that it never solicited Pennsylvania business and does not run television ads within Pennsylvania.Pursuant to the Consumer Discount Company Act and the Loan Interest and Protection Law, Pennsylvania’s Department of Banking and Securities issued a subpoena requesting documents regarding TitleMax’s interactions with Pennsylvania residents. TitleMax then stopped making loans to Pennsylvania residents and asserts that it has lost revenue.The district court held that Younger abstention did not apply and that the Department’s subpoena’s effect was to apply Pennsylvania’s usury laws extraterritorially in violation of the Commerce Clause.The Third Circuit reversed. Applying the Pennsylvania statutes to TitleMax does not violate the extraterritoriality principle. TitleMax receives payments from within Pennsylvania and maintains an actionable security interest in vehicles located in Pennsylvania; its conduct is not “wholly outside” of Pennsylvania. The laws do not discriminate between in-staters and out-of-staters. Pennsylvania has a strong interest in prohibiting usury. Applying Pennsylvania’s usury laws to TitleMax’s loans furthers that interest and any resulting burden on interstate commerce is, at most, incidental. View "TitleMax of Delaware Inc v. Weissmann" on Justia Law

by
Collecto sent a letter to collect on a debt that Hopkins initially owed to Verizon. The letter itemized Hopkins’s debt in a table, concluded that Hopkins owed $1,088.34, and offered to “resolve this debt in full” if he paid $761.84. Hopkins filed a putative class action, alleging that Collecto’s letter violated the Fair Debt Collection Practices Act, 15 U.S.C. 1692 (FDCPA). Hopkins claimed that the debt could not or was not intended to accrue interest or collection fees and that by assigning a “$0.00” value to table columns for interest and collection fees, the letter falsely implied that interest and fees could accrue and increase the amount of his debt over time. Hopkins argued consumers prioritize what debts to pay and, by suggesting that the debt might accrue interest and fees, the Collecto letter gave him the false impression that the debt needed to be prioritized.The Third Circuit affirmed the dismissal of Hopkins’s complaint with prejudice, declining to require assurances by debt collectors that itemized amounts will not change in the future. Doing so would lead to “complex and verbose debt collection letters” that would confuse consumers. Even a hypothetical “least sophisticated consumer” reads a debt collection letter without speculating about what could happen in the future based on true statements concerning the past; “he is not a litigious claim-seeker who hunts, Lagotto-like, for truffles in dunning letters.” View "Hopkins v. Collecto Inc" on Justia Law

Posted in: Consumer Law
by
Klotz’s now-deceased husband received medical services from the Hospital and incurred a $1,580 debt; he left no estate. The Hospital retained CSW to collect the debt. CSW mailed collection letters to Klotz. Klotz claims she is not liable for the debt, arguing that the Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691, preempts New Jersey’s common-law doctrine of necessaries (where a spouse is jointly liable for necessary expenses incurred by the other spouse) and sued CSW for violating the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692e and 1692f. Preemption of the doctrine would allow Klotz to pursue her FDCPA case. The Third Circuit affirmed the dismissal of the case. The ECOA does not preempt New Jersey’s doctrine of necessaries. One ECOA regulation provides that “a creditor shall not require the signature of an applicant’s spouse . . . on any credit instrument if the applicant qualifies under the creditor’s standards of creditworthiness for the amount and terms of the credit requested.” Rejecting an argument that the doctrine effectively treats her as a spousal co-signer in violation of the spousal-signature prohibition, the court reasoned that Klotz’s medical debt falls within an exemption for incidental credit and rejected an argument that CSW failed to follow the procedural requirements of the doctrine of necessaries. View "Klotz v. Celentano Stadtmauer and Wale LLP" on Justia Law

by
Moyer failed to pay her credit-card debt. The card issuer hired Patenaude to collect it. Patenaude sent Moyer a one-page, single-sided collection letter that stated: If you wish to eliminate further collection action, please contact us at …. This is an attempt to collect a debt and any information obtained will be used for that purpose. Moyer sued Patenaude under the Fair Debt Collection Practices Act (FDCPA), arguing the letter’s second sentence, “to eliminate further collection action, please contact us," would deceive a debtor and lead a debtor to believe that a phone call is a “legally effective way to stop such collection action” when, in reality, only written communication can legally stop collection activity. Moyer claimed that the Contact Sentence would make a debtor uncertain about her right to dispute the debt in writing.The Third Circuit affirmed summary judgment in favor of Patenaude. The letter included statements that inform the consumer how to obtain verification of the debt and that she had 30 days in which to do so. Patenaude invited Moyer to call to “eliminate” collection action, but never asserted, explicitly or implicitly, that the phone call would, by law, force Patenaude to cease its collection efforts. View "Moyer v. Patenaude & Felix A.P.C." on Justia Law

Posted in: Consumer Law
by
In 2012, Earl contracted for the purchase of a house in Allegheny County from NVR, the seller and builder of the house. NVR's agents made representations about the house’s construction, condition, and amenities, including that the house would be constructed in a good and workmanlike manner; that NVR would remedy any deficiencies; and that the house would be constructed in accordance with relevant building codes and standards. Construction was completed around March 2013. Upon moving in, Earl encountered several material defects. NVR’s attempts to repair the defects were inadequate and exacerbated some of the issues, despite NVR’s assurances that the problems were remedied. Several promised conditions and amenities that Earl had relied upon had not been provided.Earl, claiming that NVR’s failure to provide the promised conditions and amenities of the agreement were knowing and willful, sued for violation of the Unfair Trade Practices and Consumer Protection Law (UTPCPL) and breach of implied warranty of habitability. The Third Circuit reversed the dismissal of her UTPCPL claim. Rulings by Pennsylvania appellate courts subsequent to an earlier Third Circuit holding have cast substantial doubt upon the continuing validity of prior interpretations of the UTPCPL. The economic loss and “gist of the action” doctrines no longer bar UTPCPL claims. View "Earl v. NVR Inc" on Justia Law

by
Sun made news ink at its East Rutherford facility and purchased a dust-collection system that included a Fike suppression system to contain explosions in case of a fire in the collection system. On the first day the system was fully operational, the dust-collection system caught fire. The suppression system activated an alarm that workers did not hear. After workers saw flames and extinguished the fire, an explosion sent flames out of the dust-collector system’s ducts, severely injuring several Sun employees and causing significant property damage. The ensuing government investigations caused Sun to end production at the facility.Sun sued Fike under the New Jersey Consumer Fraud Act (CFA), N.J. Stat. 56:8-1, alleging that Fike misrepresented that: the suppression-system alarm would be audible and would comply with a specific industry standard; Fike would provide training to Sun employees; the suppression system had never experienced failures in the field; and the system was capable of preventing an explosion from entering the facility. The Third Circuit certified an issue to the New Jersey Supreme Court, then, consistent with the response, held that some of Sun’s CFA claims are absorbed and precluded by the New Jersey Products Liability Act, N.J. Stat. 2A:58C-1, and some are not. As to Sun’s remaining CFA claims, the court concluded that Sun demonstrated a genuine issue of material fact and remanded for further proceedings. View "Sun Chemical Corp v. Fike Corp" on Justia Law

by
Navient sells student loans to borrowers and services and collects on student loans. Its “subprime loans,” which had high variable interest rates and origination fees, benefited schools by maximizing enrollment. Student borrowers were not informed that the loans had a high likelihood of default. In 2000-2007, 68-87% of Navient’s high-risk loans defaulted. Navient allegedly steered borrowers into consecutive forbearances after they had demonstrated a long-term inability to repay their loans. Navient would sometimes place borrowers in forbearance even though they would have qualified for $0 per month payments in an Income-Driven Repayment (IDR) plan. In 2011-2015, more than 60% of Navient’s borrowers who enrolled in IDR plans failed timely to renew their enrollment, allegedly because of deficient notifications. Navient also allegedly made misrepresentations concerning releases for cosigners and misapplied payments, resulting in borrowers and cosigners being improperly charged late fees and increased interest.Pennsylvania sued Navient under the Consumer Financial Protection Act, 12 U.S.C. 5552, and the state’s Unfair Trade Practices and Consumer Protection Law. Nine months earlier, the Consumer Financial Protection Bureau and the states of Illinois and Washington had filed similar lawsuits. The Third Circuit affirmed the denial of a motion to dismiss. The federal Act permits concurrent action. The Higher Education Act, 20 U.S.C. 1001, preempts state law claims based on failures to disclose required information but does not preempt claims based on affirmative misrepresentations. View "Commonwealth of Pennsylvania v. Navient Corp" on Justia Law

by
The plaintiffs obtained payday loans from AWL, an online entity owned by the Otoe-Missouria Tribe of Indians. The loan agreement stated that the loan was governed by tribal law and that the borrowers consented to the application of tribal law. The plaintiffs filed a purported class action, asserting that AWL charged unlawfully high interest rates, in violation of federal and Pennsylvania law, including the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. 1961-1968. The defendants moved to compel arbitration. The district court denied their motion, holding that the loan agreements, which provided that only tribal law would apply in arbitration, stripped the plaintiffs of their right to assert statutory claims and were therefore unenforceable. The Third Circuit affirmed. Because AWL permits borrowers to raise disputes in arbitration only under tribal law, and such a limitation constitutes a prospective waiver of statutory rights, its arbitration agreement violates public policy and is therefore unenforceable. View "Williams v. Medley Opportunity Fund II, LP" on Justia Law

by
Six U.S. plaintiffs rented cars from Payless. Each signed a one-page agreement, itemizing charges, below the final paragraph, which provides: “I agree the charges listed above are estimates and that I have reviewed & agreed to all notices & terms here and in the rental jacket.” After they signed their agreements, the rental associate folded the agreement, placed it a “rental jacket,” and handed it back. The rental jacket bears the title “Rental Terms and Conditions” and contains 31 paragraphs. The word “jacket” appears in only the second paragraph. The twenty-eighth paragraph requires arbitration. The rental associates said nothing about the rental jacket. Lee rented a car in Costa Rica, using a two-sided document. The front side contains the details of the transaction. The back is titled “Rental Agreement” and includes pre-printed terms, including an arbitration clause. Both sides have signature lines but Lee signed the only front.Plaintiffs brought a putative class action, alleging violations of New Jersey, Florida, and Nevada consumer protection statutes, unjust enrichment, and conversion, alleging that they were charged for products and services that they had not authorized. The Third Circuit affirmed the denial of a motion to compel arbitration. The rental jackets were not adequately incorporated into the U.S. Agreements; the U.S. Plaintiffs did not assent to the arbitration provision. A genuine dispute exists over whether Lee was on reasonable notice of the arbitration provision on the backside of the Costa Rica Agreement. View "Bacon v. Avis Budget Group Inc" on Justia Law