Justia U.S. 7th Circuit Court of Appeals Opinion Summaries

Articles Posted in Consumer Law
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Burglars stole four desktop computers from Advocate Health and Hospitals Corporation’s Illinois administrative offices. The computers contained unencrypted private data relating to approximately four million Advocate patients. Six of those patients brought a putative class action alleging that Advocate did too little to safeguard their information, asserting claims for willful and negligent violations of the Fair Credit Reporting Act, 15 U.S.C. 1681. The district court dismissed the FCRA claims for failure to state a claim. It also found that four of the plaintiffs lacked standing to sue because their injuries were too speculative; the thieves had stolen their information but had not yet misused it. The Seventh Circuit affirmed. Using information internally does not count as “furnishing … to third parties,” so the Act’s reasonable‐procedures provision did not apply, and the FCRA claims were properly dismissed. View "Tierney v. Advocate Health & Hosp. Corp." on Justia Law

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The plaintiff alleged consumer fraud by the seller of a dietary supplement, and the district court certified a plaintiff class of individuals “who purchased Instaflex within the applicable statute of limitations of the respective Class States for personal use until the date notice is disseminated,” under Rule 23(a) and (b)(3). The court rejected defendant’s argument that Rule 23(b)(3) implies a heightened ascertainability requirement. The Seventh Circuit affirmed, noting an implicit requirement under Rule 23 that a class must be defined clearly and that membership be defined by objective criteria rather than by, for example, a class member’s state of mind. In addressing this requirement, courts have sometimes used the term “ascertainability.” Class definitions fail this requirement when they were too vague or subjective, or when class membership was defined in terms of success on the merits (fail-safe classes). This class satisfied “ascertainability” View "Mullins v. Direct Digital, LLC" on Justia Law

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Bowman law firm filed suit in Hendricks County Indiana, to recover Bentrud’s credit card debt owed to Capital One. Months later, Bowman moved for summary judgment. Bentrud responded by invoking the arbitration provision in his credit card agreement. The state court granted Bentrud’s election of arbitration and stayed the case, allowing Bentrud 30 days to initiate arbitration. The American Arbitration Association declined to do the arbitration because Capital One had previously failed to comply with its policy regarding consumer claims. Bentrud failed to meet the 30-day deadline, so that the stay automatically dissolved. Bowman filed a second summary judgment motion. Although the state court granted an extension, Bentrud characterized that motion, as an unfair or unconscionable means of attempting to collect a debt, under the Fair Debt Collection Practices Act, 15 U.S.C. 1692f. Bentrud also claimed that the Annual Percentage Rate on his credit card debt was 13.9%, but when Bowman filed its state court complaint, it averred the applicable interest rate to be 10.65%. The Seventh Circuit affirmed judgment in favor of Bowman, noting that when Bowman filed a second summary judgment motion, it acted consistently with the state court order and that any interest rate violation would be attributable to Capital One, which was not a party. View "Bentrud v. Bowman, Heintz, Boscia & Vicia, P.C." on Justia Law

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From 2006-2011, NCO purchased consumers’ defaulted debt and referred collections to its sister corporation Financial, an Illinois-licensed debt collector, and to outside attorneys, who are exempt from the Illinois Collection Agency Act (ICAA), 225 ILCS 425/2.03(5). NCO avoided direct collection activities; did not communicate with debtors or credit-reporting agencies; and did not consider itself a ”collection agency” subject to the ICAA. Financial attempted to collect the debts and outside lawyers filed 2,749 lawsuits on NCO’s behalf. Illinois consumers whose debts NCO bought and referred to Financial or outside counsel, filed a class action, alleging that NCO engaged in unlicensed debt collection and that Financial violated the ICAA because it knew or should have known that NCO was an unlicensed debt collector. The district judge agreed that NCO was not a collection agency, relying in part on testimony from a lawyer in the Illinois Department of Financial and Professional Regulation, charged with enforcing the ICAA, that the Act did not apply to NCO until 2013, when it was amended to add a definition of “debt buyer.” The court entered judgment for the defendants. The Seventh Circuit reversed, noting a 2015 Illinois Supreme Court holding that a passive debt buyer “clearly qualifies as a ‘collection agency’ as defined in section 3 of the Act.” View "Hawthorne v. NCO Fin. Sys., Inc." on Justia Law

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In 2013, hackers attacked Neiman Marcus and stole the credit card numbers of its customers. In December 2013, the company learned that some of its customers had found fraudulent charges on their cards. On January 10, 2014, it publicly announced that the cyberattack had occurred and that between July 16 and October 30, 2013, and approximately 350,000 cards had been exposed to the hackers’ malware. Customers filed suit under the Class Action Fairness Act, 28 U.S.C. 1332(d). The district court dismissed, ruling that the individual plaintiffs and the class lacked Article III standing. The Seventh Circuit reversed, finding that the plaintiffs identified some particularized, concrete, redress able injuries, as a result of the data breach. View "Remijas v. Neiman Marcus Group, LLC" on Justia Law

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Fridman paid her mortgage electronically, using the online payment system on the website of her mortgage servicer, NYCB. By furnishing the required information and clicking on the required spot, she authorized NYCB to collect funds from her Bank of America account. Although Fridman filled out the form within the grace period allowed by her note, NYCB did not credit her payment for two business days, causing Fridman to incur a late fee. Fridman filed suit on behalf of herself and a putative class, alleging that NYCB’s practice of not crediting online payments on the day that the consumer authorizes them violates the Truth in Lending Act (TILA), 15 U.S.C. 1601. The district court granted NYCB summary judgment. The Seventh Circuit reversed. An electronic authorization for a mortgage payment entered on the mortgage servicer’s website is a “payment instrument or other means of payment.” TILA requires mortgage services to credit these authorizations when they “reach[] the mortgage servicer.” View "Fridman v. NYCB Mortgage Co. LLC" on Justia Law

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A Marion, Indiana small claims court entered a judgment against Kevin about $1,000. He did not pay, although he had agreed to the judgment’s entry. Almost 20 years later Steel, claiming to represent the judgment creditor, asked the court to garnish Harold’s wages. It entered the requested order, which Harold moved to vacate, contending that Steel had misrepresented the judgment creditor’s identity (transactions after the judgment’s entry may or may not have transferred that asset to a new owner) and did not represent the only entity authorized to enforce the judgment. He did not contend that the request was untimely. A state judge sided with Steel and maintained the garnishment order in force. Instead of appealing, Harold filed a federal suit under the Fair Debt Collection Practices Act, contending that Steel and his law firm had violated 15 U.S.C. 1692e by making false statements. The district court dismissed for lack of subject-matter jurisdiction, ruling that it was barred by the Rooker-Feldman doctrine because it contested the state court’s decision. The Seventh Circuit affirmed. Section 1692e forbids debt collectors to tell lies but does not suggest that federal courts are to review state-court decisions about whether lies have been told. View "Harold v. Steel" on Justia Law

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JM Leasing purchased a brand‐new semi‐truck from PACCAR in 2007. Approximately four years and 3,000 miles later, JM concluded that the truck was a lemon and sought a refund from PACCAR under Wisconsin’s Lemon Law, Wis. Stat. 218.0171.1 PACCAR agreed to refund the purchase price, but a dispute arose over reimbursement of a $53.00 title fee and escalated into a debate over the “reasonable allowance for use” to which PACCAR was entitled . Ultimately JM won an interest‐bearing judgment of $369,196.06, plus $157,697.25 in attorneys’ fees. The Seventh Circuit affirmed, rejecting PACCAR’s claims that it complied with all relevant provisions of the Lemon Law and that the district court erred in calculating pecuniary loss. View "James Michael Leasing Co. v. Paccar, Inc." on Justia Law

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Defendants manufacture vitamins and nutritional supplements, including glucosamine pills, designed to help people with joint disorders, such as osteoarthritis. Several class action suits were filed under the Class Action Fairness Act, 28 U.S.C. 1332(d)(2), claiming violations of states’ consumer protection laws by making false claims. Eight months later, class counsel negotiated a nationwide settlement that was approved with significant modifications. The settlement requires Rexall to pay $1.93 million in fees to class counsel, plus $179,676 in expenses, $1.5 million in notice and administration costs, $1.13 million to the Orthopedic Research and Education Foundation, $865,284 to the 30,245 class members who submitted claims, and $30,000 to the six named plaintiffs ($5,000 apiece) Class members, led by the Center for Class Action Fairness, objected. The Seventh Circuit reversed, characterizing the settlement as “a selfish deal between class counsel and the defendant.” While most consumers of glucosamine pills are elderly and bought the product in containers with labels that recite the misrepresentations, only one-fourth of one percent of them will receive even modest compensation; for a limited period the labels will be changed, in trivial respects. The court questioned: “for conferring these meager benefits class counsel should receive almost $2 million?” View "Pearson v. NBTY, Inc." on Justia Law

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Redbox operates automated self‐service kiosks at which customers rent DVDs and Blu‐ray discs with a debit or credit card. Redbox outsources certain functions to service providers, including Stream, which provides customer service when, for example, a customer encounters technical problems at a kiosk and requires help from a live person. If resolution of the issue requires accessing that customer’s video rental history the Stream employee will do so. Redbox has granted Stream access to the database in which Redbox stores relevant customer information. Plaintiffs challenged Stream’s ability to access customer rental histories and Stream’s use of customer records during employee training exercises as violating the Video Privacy Protection Act, which prohibits “video tape service provider[s]” like Redbox from “disclos[ing], to any person, personally identifiable information concerning any consumer of such provider,” 18 U.S.C. 2710(b)(1). The Act includes an exception for disclosure incident to the video tape service provider’s ordinary course of business, defined as debt collection activities, order fulfillment, request processing, and the transfer of ownership. The district court granted Redbox summary judgment. The Seventh Circuit affirmed, concluding that Redbox’s actions fall within the exception for disclosures in the ordinary course of business: disclosures incident to “request processing.”View "Sterk v. Redbox Automated Retail, LLC" on Justia Law