In Technology Training Associates, Inc. v. Buccaneers Limited Partnership, No. 17-11710 (October 26, 2017), the Eleventh Circuit axed an approved class action settlement due to plaintiffs’ counsel’s apparent “desire to grab attorney’s fees” at the expense of “the best possible settlement for the class.” This case is a strong reminder that when defendants agree to a class action settlement they must take special care in ensure the settlement avoids even the appearance of being a “sweet heart” deal.
If a mortgage servicer fails to comply with its obligations under the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. 2601, et seq., or its implementing regulations, a borrower may recover “any actual damages . . . as a result of the failure.” 12 U.S.C. 2605(f)(1)(A). Thus, to prevail on a RESPA claim, a borrower must show “actual damages” sustained as a result of the failure to comply. What constitutes “actual damages” has been the subject of a litany of recent decisions involving RESPA claims. In Baez v. Specialized Loan Servicing, LLC, 2017 WL 4220292 (Sept. 22, 2017), the Eleventh Circuit provided more clarity on the scope of “actual damages” under the statute.
Jaki Baez took out a mortgage loan in 2005, and Specialized Loan Servicing (“SLS”) took over the servicing of the loan a few years later. In January 2015, Baez stopped paying her mortgage to see if she could qualify for a loan modification agreement. She retained a law firm to both help with any ensuing foreclosure and to achieve a loan modification. She agreed to pay the firm a flat fee of $400 per month in connection with those efforts. In September 2015, Baez, through her attorney, sent a written request for information under 12 C.F.R. 1024.36(a) (part of RESPA’s implementing Regulation X, 12 C.F.R. part 1024) to SLS, in which she asked for information about her mortgage loan. SLS acknowledged the letter and later submitted a packet of information in response, but Baez claimed that the packet was deficient because it did not contain a file with SLS’s communications with her. Soon after receiving SLS’s purportedly deficient response, Baez filed suit under RESPA. The trial court granted summary judgment in favor of SLS, finding that Baez failed to show that she had been injured by SLS’s response to her request for information. Baez appealed, and the Eleventh Circuit affirmed.
After a customer pawned a television that he had leased from Rent-A-Center, the manager swore out a criminal complaint for theft of rental property. When the State subsequently retired the charges without prosecution, the customer sued Rent-A-Center and its manager for malicious prosecution and false imprisonment. Relying on language in the arbitration clause that it “shall be interpreted broadly as the law allows” to include “any dispute or controversy . . . based on any legal theory, including, but not limited to allegations based on . . . tort, fraud, . . . , [and] the common law . . . ,” the trial court entered an order compelling arbitration. However, the Mississippi Supreme Court reversed, holding that “the agreement did not contemplate” a criminal complaint, based in part on the fact that such claims were not specifically listed in the arbitration agreement. This case is troubling for the financial services industry in that plaintiffs may be able to avoid even very broadly worded arbitration clauses through inflammatory allegations or allegations related to criminal conduct. The case was styled Brian Ray Pedigo v. Rent-A-Center, Inc., Civil Action No. 2016-CA-00572-SCT.
In a recent surprising loss for mortgage holders, the Alabama Supreme Court held that a failure to strictly comply with the exact terms of the mortgage when conducting a foreclosure sale can result in the sale failing. Thus, lenders should be especially careful to conduct foreclosure proceedings exactly as required by their mortgages or risk expending substantial resources toward only to have this work later undone by a court.
The CFPB is aggressively litigating overdraft issues, which means lenders should proactively review their overdraft policies to avoid the specter of costly litigation with the CFPB. For example, in Consumer Financial Protection Bureau v. TCF National Bank, No. 17-166 (D. Minn. September 8, 2017), a Minnesota district court allowed the Consumer Financial Protection Bureau to proceed to discovery on its claims against TCF National Bank for deceptive and abusive trade practices relating to overdraft fee “opt-in” programs. The district court concluded that TCF’s practice of enticing new and existing customers to opt-in to its overdraft services program (which subjected them to overdraft fees) could constitute an “unfair, deceptive, or abusive act or practice” under the Consumer Financial Protection Act.
On August 17, 2017, the Eleventh Circuit issued an opinion in Steven Bivens v. Select Portfolio Servicing, Inc. (No. 16-15119), holding that a borrower must send requests for information to a mortgage servicer’s designated addressed before a servicer’s duty to respond under the Real Estate Settlement Procedures Act are triggered. Lenders should take note of this decision because it indicates that the Eleventh Circuit will require plaintiffs to strictly comply with the terms of that statute before holding banks or mortgage servicers liable under that statute.
Earlier this month, in Schweitzer v. Comenity Bank, the Eleventh Circuit held that a consumer can partially revoke consent to be called under the Telephone Consumer Protection Act (TCPA), This decision will only further complicate the already complex and treacherous net of liability cast by that statute.
Lenders who move to compel arbitration should always consider the complex interplay between the Federal Rules of Civil Procedure and the Federal Arbitration Act. In Ryan D. Burch v. P.J. Cheese, Inc., 861 F.3d 1338 (2017), the Eleventh Circuit held that a general jury demand in the plaintiff’s complaint was not enough to preserve his statutory right to a jury trial on questions of arbitrability. Specifically, the Court held that the FAA’s procedural requirements for demanding a jury trial on arbitrability trumped the normal requirements for a jury demand found in Federal Rule of Civil Procedure 38. While the case specifically concerns a jury demand, it also demonstrates that the FAA contains procedural requirements and that the Federal Rules only fill the gaps. Therefore, when arbitrability will be an issue, lenders should take care to consider the procedural requirements of the FAA in conjunction with those of the Federal Rules.
A recent Supreme Court decision may allow defendants to avoid lawsuits in distant courts that have little or no connection to the lawsuit, especially in cases (such as mass actions) where the claims of out-of-state plaintiffs are joined with those of in-state plaintiffs. In Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco Cty., — U.S. —, 137 S. Ct. 1773, 1775 (2017), the Supreme Court held that a California state court did not have personal jurisdiction to adjudicate claims against a drug company, at least for the plaintiffs who were not California residents and who had not alleged a connection between the alleged injury and the state of California. While law school civil procedure professors spend weeks covering personal jurisdiction, the defense rarely appears in real-world practice because most plaintiffs’ attorneys are smart enough to avoid a fight over jurisdiction. Thus, defendants may give this defense only cursory consideration at the outset of a lawsuit. Following Bristol-Myers, defendants may want to more carefully consider the personal jurisdiction defense as a way to avoid litigation in a hostile forum.
Continue Reading Defendants should consider personal jurisdiction defense following Supreme Court decision, especially when the claims of out-of-state plaintiffs are joined with those of in-state plaintiffs.
What to do now about the new CFPB rule on arbitration? (1) begin planning now and (2) begin actual preparation after the 60 days runs.
Congress has 60 days after publication of the new CFPB rule to take action to stop the application of this rule. Publication occurred on Wednesday (July 19th). It is impossible to predict what Congress will do. However, we can be virtually certain that absent such Congressional action, this new rule will apply 180 days after those 60 days expire. While there are other possible hurdles for this rule (for instance, an expected lawsuit challenging the rule; a possible new CFPB Director in the future; a challenge to the CFPB’s structure, etc.), these other impacts are unlikely to prevent the rule from beginning to have application.
We suggest you use the next 60 days to plan but wait to make any substantial expenditures until it is certain what Congress will do. Here are some key questions which financial institutions should consider during those 60 days: