Justia Consumer Law Opinion Summaries

Articles Posted in US Court of Appeals for the Fourth Circuit
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While working for a company that makes skin grafts, Plaintiff caught wind of a kickback scheme operating in a Veterans Administration hospital. The scheme involved the sale of skin grafts to the VA by commission-based salespeople who were paid based on how much they sold. If true, that would likely violate the Anti-Kickback Statute, 42 U.S.C. Section 1320a-7b, which would then make each commission-induced sale a violation of the False Claims Act, 31 U.S.C. Section 3729 et seq. So Plaintiff brought a qui tam suit as a False Claims Act relator on behalf of the United States government and an analogous state-law claim under North Carolina law.   After the United States declined to intervene in the suit, Plaintiff prosecuted it. Because he used conclusory language in his original Complaint, the district court dismissed the Complaint with prejudice for failure to state a fraud claim with particularity under Federal Rule of Civil Procedure 9(b).   The Fourth Circuit agreed with the district court’s dismissal of the original Complaint for a lack of particularity. Given that it is largely made up of conclusory allegations, the original Complaint may even have failed Rule 8’s lower standard of plausibility. The court also found that the district court did not abuse its discretion in denying leave to amend for bad faith. Although the court affirmed the district court’s decision, because the district court did not take jurisdiction over the state-law claim, the court modified the decision to clarify that the state-law claim should be dismissed without prejudice. View "US ex rel. Haile Nicholson v. Medcom Carolinas, Inc." on Justia Law

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Plaintiff entered into a reverse mortgage agreement with Reverse Mortgage Solutions, Inc. (“RMS”). In violation of the Truth in Lending Act (“TILA”), RMS failed to disclose certain information at closing. Section 1635(b) of TILA imposes certain obligations on a creditor, like RMS, after it receives a notice of rescission, but RMS did not comply with those obligations either. Plaintiff sued RMS for, among other things, rescission and failing to honor her rescission rights under TILA.   A jury returned a verdict for RMS, finding that RMS did not fail to honor Plaintiff’s attempt to rescind the loan. However, the district court issued judgment as a matter of law for Plaintiff holding that RMS violated Section 1635(b)’s requirements. It also held that Plaintiff was not required to tender or return, the loan proceeds to RMS.   The Fourth Circuit vacated the district court’s judgment as a matter of law and remanded. The court explained that the district court erred in granting judgment as a matter of law to Plaintiff on the Rescission Count. In response to RMS’s failure to voluntarily unwind the loan or otherwise respond to that notice as required by Section 1635(b), Plaintiff had a right to sue RMS to obtain rescission relief under TILA. But neither Section 1635(b) nor any other provision of TILA provides that the failure of a lender to voluntarily unwind a loan or respond to a notice of intent to rescind allows a borrower to avoid tendering the loan proceeds as part of rescission. View "Teresa Lavis v. Reverse Mortgage Solutions Inc" on Justia Law

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Defendants, VSL Pharmaceuticals, Inc. and Alfasigma USA, Inc., appealed the district court’s order finding them in contempt of the court’s permanent injunction. The injunction prohibited Defendants from suggesting in promotional materials that their probiotic contained the same formulation as one marketed by Claudio De Simone and ExeGi Pharma, LLC.   On appeal, Defendants (1) their statements weren’t contemptuous, (2) their statements didn’t harm Plaintiffs (3) the district court improperly awarded attorneys’ fees, and (4) VSL and Alfasigma shouldn’t be jointly liable for the fee award. The Fourth Circuit affirmed the district court’s order.   The court explained a party moving for civil contempt must establish four elements by clear and convincing evidence, relevant here are the last two: that the alleged contemnor by its conduct violated the terms of the decree, and had knowledge (at least constructive knowledge) of such violations; and that the movant suffered harm as a result.   Defendants emphasized that consumers couldn’t access the Letter from Alfasigma’s home page. That’s true, as De Simone and ExeGi showed only that consumers could access the Letter by searching “vsl3 litigation” on Google. But the way in which consumers could access the Letter is irrelevant to Alfasigma’s constructive knowledge that it remained on the website.   Further, under the Lanham Act, “commercial advertising or promotion” is “commercial speech . . . for the purpose of influencing consumers to buy goods or services.” Here, Defendants’ press release’s final sentence emphasizes VSL#3’s commercial availability, so the district court reasonably viewed the message as an attempt to realize economic gain. View "Claudio De Simone v. VSL Pharmaceuticals, Inc." on Justia Law

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Plaintiffs, a group of drivers, sued Defendants, a group of personal injury lawyers, after Defendants sought and obtained car accident reports from North Carolina law enforcement agencies and private data brokers and then sent Plaintiffs unsolicited attorney advertising material. Plaintiffs' claims were brought under the Driver’s Privacy Protection Act (“DPPA”).The district court held that, although Plaintiffs have standing to bring their claims, the claim failed on the merits.The Fourth Circuit affirmed. Plaintiffs have a legally recognizable privacy interest in the accident reports. However, Defendant's conduct in obtaining the records did not constitute a violation of DPPA. Defendants obtained Plaintiffs’ personal information from the accident reports; however, Plaintiffs failed to preserve the argument that those accident reports are“motor vehicle records under DPPA. View "William Garey v. James S. Farrin, P.C." on Justia Law

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Plaintiff, a North Carolina attorney, believed he uncovered fraud perpetrated by forty-five adult care homes upon the United States and the State of North Carolina. According to Plaintiff, Defendants violated a North Carolina Medicaid billing regulation, and did so knowingly, as evidenced by the clarity of the regulation and by the fact Defendants did not ask the regulators for advice. The district court granted Defendants’ motion for summary judgment, holding that Plaintiff failed to proffer evidence showing “that the bills submitted by Defendants to North Carolina Medicaid for PCS reimbursement were materially false or made with the requisite scienter.”   The Fourth Circuit affirmed the district court’s decision. The court held that no reasonable juror could find Defendants acted with the requisite scienter on Plaintiff’s evidence. The court explained that The False Claims Act (“FCA”) imposes civil liability on “any person who . . . knowingly presents, or causes to be presented” to the Federal Government “a false or fraudulent claim for payment or approval.” The Act’s scienter requirement defines “knowingly” to mean that a person “has actual knowledge of the information,” “acts in deliberate ignorance of the truth or falsity of the information,” or “acts in reckless disregard of the truth or falsity of the information.” Here, Plaintiff failed to identify any evidence that Defendants knew, or even suspected, that their interpretation of the relevant policy and the guidance from NC Medicaid was incorrect. Nor did Plaintiff identify any evidence that Defendants attempted to avoid discovering how the regulation applied to adult care homes. View "US ex rel. Stephen Gugenheim v. Meridian Senior Living, LLC" on Justia Law

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Following a data breach targeting servers owned by Defendant, Plaintiffs alleged that Defendant violated federal securities laws by omitting material information about data vulnerabilities in their public statements.The Fourth Circuit affirmed the district court’s dismissal of the complaint, finding that the investors did not adequately allege that any of Defendant’s statements were false or misleading when made.The court explained that to state a claim under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, a plaintiff must first allege a “material misrepresentation or omission by the defendant.” However, not all material omissions give rise to a cause of action. Here, Plaintiffs focus on statements about the importance of protecting customer data; privacy statements on Defendant's website; and cybersecurity-related risk disclosures. The court found that Plaintiffs failed to allege that any of the challenged statements were false or rendered Defendant's public statement misleading. Although Defendant could have disseminated more information to the public about its vulnerability to cyberattacks, federal securities law does not require it to do so. View "Construction Laborers Pension Trust Southern CA v. Marriott International, Inc." on Justia Law

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Morgan’s credit reports reflected purported overdue home loan payments. Morgan wrote to his loan servicer: Please find a report ... stating as of 10/13/15 I owe Caliber $16,806[.] [A]lso on 9/20/16 I called Caliber and talked to Thomas ID#27662[.] [H]e stated I owe $30,656.89 and the $630.00 on my record is late charges. Can you please correct your records[?] Your office reporting the wrong amount to the credit agency is effecting [sic] my employment. Morgan included a copy of a credit report. Morgan alleges the defendant continued to report adverse loan information.When Johnson fell behind on her mortgage payments, the defendant reported to credit reporting agencies. While seeking a loan modification, Johnson sent a letter, challenging the existence of “title issues” and requesting “a reasonable investigation,” correction of the “errors,” and “an accounting of all sums you have imposed." The parties ultimately finalized a loan modification but in the interim, the defendant continued reporting adverse information.Johnson and Morgan filed a putative class action. Qualified written requests (QWRs) under the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. 2601 or Consumer Financial Protection Bureau Regulation X, trigger an obligation to cease providing adverse information to credit reporting agencies. The Fourth Circuit reversed the dismissal of Morgan’s claim but affirmed the dismissal of Johnson’s claim. Where a written correspondence to a loan servicer provides sufficient information to identify the account and an alleged servicing error, such correspondence is a QWR; if it merely challenges a contractual issue, it does not implicate a servicing issue and is not a QWR. Johnson’s correspondence did not concern the servicing of her account. View "Morgan v. Caliber Home Loans, Inc." on Justia Law

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In 2005, Lyons opened a Home Equity Line of Credit (HELOC) with PNC’s predecessor, signing an agreement with no arbitration provision. In 2010, Lyons opened deposit accounts at PNC and signed a document that stated he was bound by the terms of PNC’s Account Agreement, including a provision authorizing PNC to set off funds from the account to pay any indebtedness owed by the account holder to PNC. PNC could amend the Account Agreement. In 2013, PNC added an arbitration clause to the Account Agreement. Customers had 45 days to opt out. Lyons opened another deposit account with PNC in 2014 and agreed to be bound by the 2014 Account Agreement, including the arbitration clause. Lyons again did not opt out. Lyons’s HELOC ended in February 2015. PNC began applying setoffs from Lyons’s 2010 and 2014 Accounts.Lyons sued under the Truth in Lending Act (TILA). PNC moved to compel arbitration. The court found that the Dodd-Frank Act amendments to TILA barred arbitration of Lyons’s claims related to the 2014 Account but did not apply retroactively to bar arbitration of his claims related to the 2010 account. The Fourth Circuit reversed in part. The Dodd-Frank Act 15 U.S.C. 1639c(e) precludes pre-dispute agreements requiring the arbitration of claims related to residential mortgage loans; the relevant arbitration agreement was not formed until after the amendment's effective date. PNC may not compel arbitration of Lyons’s claims as to either account. View "Lyons v. PNC Bank" on Justia Law

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A class action claimed Nationstar violated consumer protection laws in servicing class members’ mortgage loans. Years later, the parties filed a notice of settlement. A magistrate granted preliminary approval. In order of priority, the parties proposed that the $3,000,000 settlement fund pay for administrative expenses up to $300,000, attorneys’ fees, a class representative award, and class claims. The settlement proposed notice by Email, Postcard, and Longform. The Email and Postcard Notice informed class members of the amount of the settlement, how to submit a claim, how to opt-out of the class, and where to find the Longform Notice. The Longform Notice explained the attorneys’ fee arrangement. The notices did not estimate each class member's recovery. Nationstar agreed not to oppose class counsel’s fee request up to $1,300,000. Class counsel submitted records that supported $1,261,547.50 in fees and $217,657.26 in unreimbursed expenses but requested only $1,300,000. The value of a class member’s claim is determined by a points system based on Nationstar’s treatment of their account and the class member’s expenses.An absent class member, having sued Nationstar in California state court, objected to the settlement, arguing that the notice was insufficient; the settlement was unfair and inadequate; the release was unconstitutionally overbroad; and the attorneys’ fee award was improper. The magistrate overruled those objections. The Fourth Circuit affirmed, noting that over 97% of the nearly 350,000 class members received notice and the low opt-out rate. View "McAdams v. Nationstar Mortgage, LLC" on Justia Law

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The district court dismissed a class action, alleging that Carrington violated the Maryland Consumer Debt Collection Act (MCDCA) and the Maryland Consumer Protection Act (MCPA) by charging $5 convenience fees to borrowers who paid monthly mortgage bills online or by phone. The district court held that in charging the convenience fees, Carrington was not a “collector” for either MCDCA claim, that Carrington was not a “debt collector” under the Fair Debt Collection Practices Act (FDCPA, 15 U.S.C. 1692f(1)), that plaintiffs’ choice to use the online payment option was “permitted by law,” that Carrington’s convenience fees were not “incidental” to plaintiffs’ mortgage debt, and that Carrington had the “right” to collect the convenience fees since none of the mortgage documents expressly prohibited the fees and plaintiffs voluntarily chose to make payments online.The Fourth Circuit reversed in part. Carrington need not be a debt collector under federal standards for plaintiffs’ state claim to proceed. Carrington violated the MCDCA by engaging in conduct violating the FDCPA, so the derivative MCPA claim can also proceed. The FDCPA prohibits “[t]he collection of any amount . . . unless such amount is expressly authorized by the agreement creating the debt or permitted by law.” View "Alexander v. Carrington Mortgage Services" on Justia Law