“I’m strong to the fin-ich. Cause I eats me spin-ach. I’m Popeye the . . . debt collector man?”

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

PopeyeFor lawyers, debt collection can be a trap for the unwary. The Fair Debt Collection Practices Act ("FDCPA") governs debt collection by both attorneys and non-attorneys. It generally prohibits debt collectors from using deceptive, abusive, or unfair practices to collect debts. While that sounds straightforward, it is often difficult to figure out whether you are even a debt collector governed by the FDCPA, much less whether what you are trying to collect is a debt under the FDCPA and whether what you are doing to collect that debt is deceptive. And the consequences for running afoul of the FDCPA — statutory damages and attorney's fees — can be significant.

A recent decision from the U.S. Court of Appeals for the Third Circuit, Tepper v. Amos Financial, LLC, offered a good primer on one of these tricky issues — whether a party that buys debt and seeks to collect that debt for its own account qualifies as a debt collector under the FDCPA — but the more interesting aspect of the opinion is the court's frequent references to Popeye (the sailor man, not the fast food restaurant).

The opinion began: "Many would gladly pay Tuesday for a hamburger today." This, of course, is a reference to Wimpy's famous tag-line in Popeye. The court then described the basic purpose of the FDCPA and introduced the issue in the case as follows:

The Act does not apply . . . to all entities who collect debts; only those whose principal purpose is the collection of any debts, and those who regularly collect debts owed another are subject to its proscriptions. Those entities whose principal place business is to collect the defaulted debts they purchase seek to avoid the Act's reach. We believe such an entity is what it is – a debt collector. [Emphasis added.] If so, the Act applies.

Understandably, the court was not willing to go so far as have the defendant declare "I yam what I yam, and that's all that i yam," but you get the point. Popeye references continued throughout the opinion, so keep reading. 

Continue reading ““I’m strong to the fin-ich. Cause I eats me spin-ach. I’m Popeye the . . . debt collector man?””

NJ Supreme Court Narrowly Defines “Aggrieved Consumer.” End Of The Road For One Type Of “No Injury” Class Action?

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Contract(pd)
I have written a number of times about New Jersey's Truth in Consumer Contract, Warranty and Notice Act (TCCWNA). (Here, here, and here for example.) This statute, which was largely ignored after it was enacted in 1981, became increasingly popular in recent years as part of so-called no injury class actions. (So-called mostly by defense counsel, not plaintiff's counsel.) Its popularity may now have come to an end, however, because the New Jersey Supreme Court recently issued its opinion in the highly-anticipated case, Spade v. Select Comfort Corp., which answered two questions certified to it by the U.S. Circuit Court of Appeals for the Third Circuit, one of which appears to hamper, at the very least, the ability of plaintiffs to sue for alleged violations of the act.

By way of brief background, the TCCWNA was enacted to prevent deceptive practices in consumer contracts by prohibiting the use of illegal terms or warranties. It provides:

No seller . . . shall in the course of his business offer to any consumer or prospective consumer or enter into any written  consumer contract  .  .  .  or display any written . . . notice or sign . . . which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller . . . as established by State or Federal law at the time the offer is made . . . or the . . . notice or sign is given or displayed.

To state a claim under the TCCWNA, a plaintiff must prove four elements: (1) that it is a consumer; (2) that defendant is a seller; (3) that the seller offered a consumer contract containing a provision that violated a legal right of the consumer or a responsibility of the seller; and (4) that it was an "aggrieved consumer." Any party found to have violated the TCCWNA is liable for a civil penalty of not less than $100, actual damages, or both, and reasonable attorneys' fees and court costs.

The questions certified to the Supreme Court in Spade arose out of two cases that had been consolidated by the district court. Each involved plaintiffs who ordered furniture pursuant to contracts that violated certain regulations promulgated by New Jersey's Division of Consumer Affairs. The regulations require, among other things, that furniture sellers deliver furniture to customers by or before the promised delivery date or provide written notice that they will not be able to do so. Sellers must also provide notice to the purchaser that if the delivery is late, the consumer has the option of canceling the order and receiving a full refund, or agreeing to accept delivery at a specified later date. The regulations also prohibit sellers from including certain language in their contracts, such as "all sales final," "no cancellations," and "no refunds." In Spade, plaintiffs alleged that the contracts they entered into with defendants did not contain language required by these regulations, contained language prohibited by these regulations, or both. Notably, however, plaintiffs received their furniture deliveries on time.  

Continue reading “NJ Supreme Court Narrowly Defines “Aggrieved Consumer.” End Of The Road For One Type Of “No Injury” Class Action?”

You Can’t Be Compelled To Arbitrate In A Nonexistent Forum

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Arbitration (pd)This one may seem obvious, but, in MacDonald v. Cashcall, Inc., the U.S. Court of Appeals for the Third Circuit held that a contractual arbitration provision that calls for arbitration in an "illusory forum" is not enforceable. So, if you were thinking about trying to compel arbitration in Wakanda or before the Jedi Council, better think twice.

In MacDonald, plaintiff entered into a loan agreement with a entity known as Western Sky in connection with a $5,000 loan. The loan agreement stated that it was "subject solely to the jurisdiction of the Cheyenne River Sioux Tribe," and "governed by the . . . laws of the Cheyenne River Sioux Tribe." It also contained an arbitration provision requiring that any disputes arising out of the agreement be "conducted by the Cheyenne River Sioux Tribal Nation by an authorized representative in accordance with its consumer dispute rules and the terms of [the agreement]." But the agreement also provided that either party, after demanding arbitration, could select an arbitrator from the American Arbitration Association ("AAA") or Judicial Arbitration and Mediation Services ("JAMS") to administer the arbitration, and, if it did, "the arbitration [would] be governed by the chosen arbitration organization's rules and procedures" to the extent that they did not contradict the "law of the Cheyenne River Sioux Tribe." The agreement also contained a severability clause, providing that, if any provision of the agreement was deemed invalid, the remaining provisions would remain in effect.

Although plaintiff originally borrowed $5,000, "[h]e was charged a $75 origination fee and a 116.73% annual interest rate over the seven-year term of the loan, resulting in a $35,994.28 finance charge." After paying approximately $15,493 on the loan, which included $38.50 in principal, $15,256.65 in interest, and $197.85 in fees, plaintiff filed a putative class action lawsuit against defendants, asserting federal RICO claims and state law claims for usury and consumer fraud. Defendants moved to compel arbitration. The district court denied the motion, holding that the loan agreement's "express disavowal of federal and state law rendered the arbitration agreement invalid as an unenforceable prospective waiver of statutory rights." Defendants appealed. 

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Size Matters: Seventh Circuit Rejects Subway Footlong Settlement Because It Provided No Meaningful Benefit To Class Members

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Subway (pd)I am a regular Subway customer, so I read the Seventh Circuit's opinion, In re. Subway Footlong Sandwich Marketing and Sales Practices Litigation, with great interest. You probably remember the events that spawned this litigation. As the Seventh Circuit described it: "In January 2013 Matt Corby, an Australian teenager, purchased a Subway Footlong sandwich and, for reasons unknown, decided to measure it. The sandwich was only 11 inches long. He took a photo of the sandwich next to a tape measure and posted the photo on his Facebook page. Thus a minor social-media sensation was born." And, "[w]ithin days of Corby's post, the American class-action bar rushed to court," therefore, a class action lawsuit was also born. It ended a few years later with a settlement, which the Seventh Circuit just overturned.

To say that the Seventh Circuit was critical of the settlement would be an understatement. Its opinion is filled with subtle, and not so subtle, criticisms of the settlement and plaintiffs' counsel. For example, early in its opinion, the court observed: "In their haste to file suit [ ] the lawyers neglected to consider whether the claims had any merit. They did not." It did not get much better for plaintiffs from that point on.

The court noted that the parties engaged in limited, informal discovery early on in the case, with the intent of going to mediation. This discovery revealed that plaintiffs' claims were deficient. It showed that "the length of the [baked] bread has no effect on the quantity of food each customer receives." First, all of Subway's raw dough is exactly the same size. So, even the few rolls that bake to approximately a quarter-inch less than 12 inches because of natural, and unpreventable, "vagaries in the baking process" provide the same bread as those that bake to the full 12 inches. Second, Subway standardizes the amount of meat and cheese that its "sandwich artists" put on each sandwich, so whether the bread is 12 inches long or a quarter-inch short, the customer still gets the same amount of food. (In the interest of full disclosure, because I am a regular, I do occasionally get an extra slice of ham, salami, and pepperoni on my six-inch BMT at my local Subway.) "This early discovery, limited though it was, extinguished any hope of certifying a damages class."

"Rather than drop the suits as meritless," however, plaintiffs shifted the focus of the lawsuit from one seeking damages to one seeking injunctive relief. THey filed an amendec complaint and, after mediation, reached a settlement with Subway, under which Subway would, for four years, implement practices designed to ensure, the the extent possible, that its sandwich rolls measured at least 12 inches long. But, the settlement noted that "because of the inherent variability in food production and the bread baking process, Subway could not guarantee that each sandwich roll [would] always be exactly 12 inches or greater in length after baking." In other words, Subway would try to fix, but could not guarantee that it would fix, the problem that spawned the lawsuit. 

Continue reading “Size Matters: Seventh Circuit Rejects Subway Footlong Settlement Because It Provided No Meaningful Benefit To Class Members”

On a warm summer’s evenin’, on a train bound for nowhere . . . is a dispute over insuring a stranger’s life

 by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Gambling

I know it is a little obvious, but I couldn't write a post about gambling without using lyrics from "The Gambler." Fortunately, the case this post discusses — Sun Life Assurance Co. of Canada v. U.S. Bank National Association — is anything but obvious. Sun Life involved gambling on another person's life but not in a Deer Hunter, Russian roulette kind of way. In Sun Life, the U.S. Court of Appeals for the Seventh Circuit addressed the enforceability of an insurance policy that insured a stranger's life.

In Sun Life, Judge Posner began his decision by discussing the common law principle that "forbids a person to own an insurance policy that insures someone else's life unless the policy owner has an insurable interest in that life." A wife can have an insurable interest in her husband's or children's lives, a creditor can have an insurable interest in a debtor's life, but "you cannot own an insurance policy on the life of a stranger who you happen to know is in poor health and likely to die soon." The reason is that, by doing so, you are essentially gambling on another person's life, and gambling contracts are generally unenforceable as a matter of public policy. 

Continue reading “On a warm summer’s evenin’, on a train bound for nowhere . . . is a dispute over insuring a stranger’s life”

Latest Round In Fight Over Rare Double Eagle “Coins” Goes To Government

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Double eagle (pd)
I have written before about Langbord v. United States Department of the Treasury. (Click here and here for the prior posts.) This is a case about ten, 1933 Double Eagle coins, which I described in a prior post as follows:

[The Double Eagle] is a $20 gold piece that was designed by famed artist Augustus Saint-Gaudens after he was commissioned by President Theodore Roosevelt to help beautify American coinage. Almost a half million Double Eagles were minted, but none were ever officially released into circulation. Shortly after they were minted, newly-elected President Franklin D. Roosevelt, seeking to stem a run on the banks, issued Executive Order 6102, which made it illegal to "hoard" large amounts of gold. Accordingly, the U.S. Mint was ordered to stop issuing gold coins and to melt down any gold coins in its possession, including the Double Eagle. As part of this process, two Double Eagles were sent to the Smithsonian Institution for posterity, but the rest were supposed to have been melted down.

However, not all of the coins were melted down. Around 20 were smuggled out of the U.S. Mint. Over the years, nine were located by, or returned to, the Secret Service. Another one was seized by the Secret Service in a sting operation at the Waldorf Astoria after the owner, Stephen Fenton, was lured there by agents posing as potential buyers. (It was later stored in the World Trade Center but was removed just a few months before the 9/11 terror attacks, just one of the interesting facts in this case.) After Fenton sued, the government agreed to auction off the coin and split the proceeds with the owner. It sold for $7.6 million, more than twice the world record for any coin sold at auction at the time.

Shortly after the auction, Joan Langbord notified the government that she had found 10 Double Eagles in a safe-deposit box belonging to her father, Israel Switt. (According to the government, however, this discovery was hardly fortuitous. The government claims that all of the Double Eagles that escaped its control went through Switt's hands. It claims that he worked with a corrupt cashier at the U.S. Mint in Philadelphia to smuggle Gold Eagles out of the Mint before they could be melted down.) The lawyer representing Ms. Langbord and her sons, the same one who represented Fenton, proposed a sale of the 10 coins like the one agreed to with Fenton. The government  indicated it was "amenable," so the Langbords sent the coins to the U.S. Mint for inspection. After the coins were authenticated, the Langbords requested that they be returned, but the U.S. Mint refused. The Langbords responded by submitting a "seized asset claim" demanding the return of the coins. When they were not returned, the Langbords sued.

Continue reading “Latest Round In Fight Over Rare Double Eagle “Coins” Goes To Government”

Alleged Omission In Consumer Contract Does Not Violate New Jersey Consumer Protection Statute

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Washer dryer (pd)New Jersey's Consumer Fraud Act (CFA) has long been a favorite of  plaintiff's attorneys, but there is another consumer protection statute that is rapidly gaining on the CFA in popularity — the Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA) (or, as it is sometimes awkwardly pronounced, "ta-KWA-na"). Although it has been around for thirty years, case law interpreting the TCCWNA is still in its infancy because the act has only recently become a common claim in putative consumer class actions. In a new, unpublished decision, Matijakovich v. P.C. Richard & Son, the U.S. District Court for the District of New Jersey, addressed one unsettled aspect of the still developing body of case law surrounding the TCCWNA.

First, a brief primer on the TCCWNA, which provides, in part:

No seller . . . shall in the course of his business offer to any consumer or prospective consumer or enter into any written  consumer contract  .  .  .  or display any written . . . notice or sign . . . which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller . . . as established by State or Federal law at the time the offer is made . . . or the . . . notice or sign is given or displayed.

Its purpose is to prevent deceptive practices in consumer contracts by prohibiting the use of illegal terms or warranties. To state a claim under the TCCWNA, a plaintiff must prove four elements: (1) that it is a consumer; (2) that defendant is a seller; (3) that the seller offered a consumer contract; and (4) that the consumer contract contained a provision that violated a legal right of the consumer or a responsibility of the seller. Any party found to have violated the TCCWNA is liable for a civil penalty of not less than $100, actual damages, or both, in addition to reasonable attorneys' fees and court costs.

Continue reading “Alleged Omission In Consumer Contract Does Not Violate New Jersey Consumer Protection Statute”