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

Capital One retained a collection agency, which sent plaintiff, its debtor, a dunning letter with notice of her debt validation rights. Plaintiff claims that the content as a whole over-shadowed the debt validation notice, violating the Fair Debt Collection Practices Act, 15 U.S.C. 1692g. The district court dismissed, stating that language like "act now" is only puffery and that placement of the notice on the back of the letter complies with the Act. The Seventh Circuit affirmed, upholding the district court's rejection of a request to conduct a consumer survey to prove that the letter was confusing.

The Telephone Consumer Protection Act, 47 U.S.C. 227, curtails use of automated dialers and prerecorded messages to cell phones, whose subscribers often are billed for the call. AT&T hired a bill collector to call cell phone numbers at which customers had agreed to receive calls. The collection agency used a predictive dialer that works autonomously until a human voice answers. Predictive dialers continue to call numbers that no longer belong to the customers and have been reassigned to individuals who had not contracted with AT&T. The district court certified a class of individuals receiving automated calls after the numbers were reassigned and held that only consent of the subscriber assigned the number at the time of the call justifies an automated or recorded call. The Seventh Circuit affirmed.

The Fair and Accurate Credit Transactions Act, 15 U.S.C. 1681c(g), requires that electronically printed receipts not display more than the last 5 digits of the card number, but does not define "card number." A Shell card designates nine digits as the "account number" and five as the "card number" and has 14 digits embossed on the front and 18 digits encoded on the magnetic stripe. Shell printed receipts at its gas pumps with the last four digits of the account number. Plaintiffs contend that it should have printed the final four numbers that are electronically encoded on the magnetic stripe, which the industry calls the "primary account number." Plaintiffs did not claim risk of identity theft or any actual injury, but sought a penalty of $100 per card user for willful failure to comply. The district court denied Shell summary judgment. The Seventh Circuit reversed, holding that Shell did not willfully violate the Act.

The brokerage entered into agreements with customers that set a fee for handling, postage, and insurance for mailing confirmation slips after each securities trade. Plaintiff filed claims of breach of contract and unjust enrichment, seeking class certification and recovery of fees charged since 1998. The brokerage removed to federal court under the Class Action Fairness Act, 28 U.S.C. 1332(d), or the Securities Litigation Uniform Standards Act 15 U.S.C. 78p(b) and (c) and 78bb(f), and obtained dismissal. The Seventh Circuit affirmed, first holding that SLUSA did not apply because any alleged misrepresentation was not material to decisions to buy or sell securities, but CAFA's general jurisdictional requirements were met. The agreement did not suggest that the fee represents actual costs, and it was not reasonable to read this into the agreement. Nor did the brokerage have an implied duty under New York law to charge a fee reasonably proportionate to actual costs where it notified customers in advance and they were free to decide whether to continue their accounts.

In 2009, lender issued plaintiff a four-month trial loan modification, under which it agreed to permanently modify the loan if she qualified under Home Affordable Mortgage Program guidelines, implemented by the Department of the Treasury to help homeowners avoid foreclosure during the decline in the housing market. Plaintiff filed a putative class action, claiming that she did qualify and that lender refused to grant her a permanent modification. She alleged violations of Illinois law under common-law contract and tort theories and under the Illinois Consumer Fraud and Deceptive Business Practices Act. The district court dismissed, finding that HAMP does not confer a private federal right of enforcement action on borrowers. The Seventh Circuit affirmed in part and reversed in part. Plaintiff stated viable claims under Illinois law for breach of contract or promissory estoppel, fraud, and unfair or deceptive business practices. Claims of negligent misrepresentation or concealment were not viable. HAMP and its enabling statute (12 U.S.C. 5219(a)) do not contain a federal right of action, but neither do they preempt otherwise viable state claims.

Redbox rents DVDs, Blu-ray discs, and video games from automated retail kiosks and was sued under the Video Privacy Protection Act, 18 U.S.C. 2710. The district court held that Act provisions requiring destruction of records containing personally identifiable information can be enforced by suit for damages. After deciding to accept the interlocutory appeal because it will materially advance the ultimate termination of the class action, the Seventh Circuit reversed. The court noted the placement of the damages remedy in the statute, after description of a prohibitions on knowing disclosure of personally identifiable information, but before prohibition on use of such information before tribunals or the record-destruction mandate. The court also noted the "unsuitability" of those provisions to damage awards.

Plaintiff entered into a two-year wireless service agreement with First Cellular in 2005. The company was acquired by defendant, which began dismantling and reorganizing. Plaintiff initially agreed to defendant's terms, but later filed a class action, claiming breach of contract for rendering his phone and equipment useless and refusing to honor the features and prices of the First Cellular Agreement. He also claimed deceptive rade practices under Illinois law and civil conspiracy. The district court denied defendant's motion to compel arbitration. The Seventh Circuit reversed, finding that defendant's arbitration clause applies because part of the claims are based on services and products received under defendant's contract. Defendant's contract unambiguously covers any dispute "arising out of" or "relating to the services and equipment." If a contract provides for arbitration of some issues, any doubt concerning the scope of the arbitration clause is resolved in favor of arbitration as a matter of federal law, 9 U.S.C. 2.

Class actions charged defendant, a credit-reporting agency, with violating the Fair Credit Reporting Act, 15 U.S.C. 1681, by selling consumer credit information to advertisers. The actions were consolidated and settled for $75 million. Class counsel appealed approval of a settlement with members of the class who filed individual claims in state court, that allowed defendant, after paying the settlements, to be reimbursed out of the $75 million class settlement fund. The law firm (Watts) that represented the individual claimants, did nothing to create the fund out of which the settlements will be paid, but stands to receive from $10 to $15 million in attorneys’ fees out of the class settlement fund. Class counsel argued that it should receive a portion of Watts' fees on the ground that class counsel contributed to the creation of the fund. The Seventh Circuit deemed Watts' motion as one to add it as a party and granted the motion. Watts wants to be an appellee to defend its right to attorneys' fees from the fund that its clients (individual claimants) agreed to pay, according to the court, but doesn't want to be a party that could be ordered to disgorge some of the fees, should class counsel prevail.

In 2008 the city levied fines against plaintiff, arising from a parcel of real estate that he no longer owned. When he did not pay those fines, the city retained defendant to collect. The district court dismissed his suit under the Fair Debt Collection Practices Act, 15 U.S.C. 1692-1692p, finding that fines are not "debts" covered by the FDCPA. For purposes of the statute, a "debt" can arise only from a "transaction in which money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes." The Seventh Circuit affirmed, stating that fines cannot reasonably be understood as debts arising from consensual consumer transactions for goods and services.

A provision of the Truth-in-Lending Act, 15 U.S.C. 1601, requires that consumers receive clear and conspicuous notice of the right to rescind within three days. Regulation Z requires that the consumer be given two copies of the notice at closing; failure to comply extends the time to rescind to three years, 13 C.F.R. 226.23(a)(3). When plaintiff closed the refinancing of his home in 2007 he signed a receipt for the notices, but he claims that he discovered, two years later, that he had only one copy. The district court entered summary judgment in favor of the lender and title company. The Seventh Circuit reversed and remanded, holding that plaintiff presented enough evidence to survive summary judgment.