Teaching Consumer Credit Law in an Evolving Australian Economy

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Consumer News Alert Recent Decisions Since October 2006, the Center for Consumer Law has published the “Consumer News Alert.” This short newsletter contains everything from consumer tips and scam alerts, to shopping hints and financial calculators. It also has a section just for attorneys, highlighting recent decisions. The alert is delivered by email three times a week. Below is a listing of some of the cases highlighted during the past few months. To subscribe and begin receiving your free copy of the Consumer News Alert in your mailbox, visit the Center for Consumer Law, www.uhccl.org. UNITED STATES COURTS OF APPEAL Rewards program promises made in advertisements may be enforced. The Ninth Circuit held that a cigarette company may have made promises in advertising for a rewards program that customers could enforce in a breach of contract suit. The court found the promises enforceable, despite the fact that they were made in an advertisement. “[W]e find no reason to presume that RJR’s communications did not constitute an offer merely because they were addressed to the general public in the form of advertisements. The operative question under California law … is simply ‘whether the advertiser, in clear and positive terms, promised to render performance in exchange for something requested by the advertiser, and whether the recipient of the advertisement reasonably might have concluded that by acting in accordance with the request a contract would be formed.” Sateriale v. R. J. Reynolds Tobacco Co., No. 11-55057, 2012 U.S. App. LEXIS 14394 (9th Cir. July 13, 2012). Collection letter cannot be sent “c/o debtor’s employer.” The Ninth Circuit held that a law firm violated federal debt collection law by sending a collection notice addressed to the debtor in “care of” her employer. Evon v. Law Offices of Sidney Mickell, Nos. 10- 16615, 10-17836, 2012 U.S. App. LEXIS 15861 (9th Cir. Aug. 1, 2012). Collection letter did not violate Fair Debt Collection Practices Act. The Fifth Circuit held that a debt collection letter’s threat did not violate federal law by including language that purportedly contradicted and overshadowed statutorily required notices. “The supposed threat falls in the category of ‘letters [that] encourage debtors to pay their debts by informing them of the possible negative consequences of failing to pay,’ words that do not overshadow the required notice language. This is because ‘one way to encourage someone with a true dispute to come forward and resolve that dispute is to inform him of the possible negative consequences of his continued inaction.’ . . . The letter in this case essentially provided such warnings and nothing more. Thus, the notice language in [the defendant’s] letter is not overshadowed by the letter’s badcredit warnings.” McMurray v. ProCollect, Inc., No. 11-10291, 2012 U.S. App. LEXIS 14866 (5th Cir. July 16, 2012). Arbitration clause doesn’t cover job applicant. The First Circuit held that a mandatory arbitration clause in an employment application was unenforceable against a pregnant woman who brought suit after being denied a job. The employer argued that the arbitration clause unambiguously covered all disputes with job applicants. The court disagreed, holding that because the clause was ambiguous, and because the party that drafted it had all the bargaining power, it should be construed against the employer. “[N]othing in the arbitration clause refers to ‘applicants’ . . . Instead every reference is to ‘your employment,’ ‘the employment process,’ or ‘pre-employment disputes.’ Accordingly, there is a reasonable basis for [the applicant’s] belief that she would only be bound by the arbitration clause if ultimately hired.” Gove v. Career Sys. Dev. Corp., No. 11-2468, 2012 U.S. App. LEXIS 14653 (1st Cir. July 17, 2012). 34 Journal of Consumer & Commercial Law
Express warranty requires privity. The Fifth Circuit held that a claim against a manufacturer for breach of express warranty requires that the affirmation or promise be made to the plaintiff. Scott v. Dorel Juvenile Grp. Inc., No. 11-10349, 2012 U.S. App. LEXIS 155 (5th Cir. Jan. 4, 2012). Class-wide arbitration claim may proceed even without express agreement. The First Circuit held that an arbitrator, and not a judge, must decide if an arbitration agreement allows for a dispute to move forward individually or on a class-wide basis. The plaintiff franchisor argued that the U.S. Supreme Court’s 2010 ruling in Stolt-Nielsen S.A. v. AnimalFeeds International Corporation required the express consent of the parties before arbitration could proceed as a class action. But the First Circuit disagreed, holding not only that an agreement silent on the class-action question did not control, but also that the arbitrator was properly in a position to decide the intent of the parties. “We . . . reject the . . . precept, on which [the franchisor’s] argument depends, that there must be express contractual language evincing the parties’ intent to permit class or collective arbitration,” the court held. “Stolt-Nielsen imposes no such constraint on arbitration agreements.” Fantastic Sams Franchise Corp. v. FSRO Ass’n Ltd., 683 F.3d 18 (1st Cir. 2012). Defendant has right to show amount in controversy. The Tenth Circuit held that a defendant in a consumer lawsuit should have had the opportunity to show that the amount in controversy was sufficient for removal under the Class Action Fairness Act. The district court remanded the consumer’s class action lawsuit to state court, concluding from the face of the complaint that the damages at issue did not meet the Act’s $5 million jurisdictional threshold. The court held that defendant should have had the opportunity to show by the preponderance of the evidence that the amount at stake satisfied the Act’s requirements. It noted that the circuits are divided over the proper standard in this context. Frederick v. Hartford Underwriters Ins. Co., 683 F.3d 1242 (10th Cir. 2012). Law firm bringing replevin action is subject to Fair Debt Collection Practices Act. The Fourth Circuit held that the aunt of the debtor could maintain an action against a law firm based on an alleged violation that occurred in connection with a replevin proceeding. Rawlinson v. Law Office of William M. Rudow, No. 10-2148, 2012 U.S. App. LEXIS 173 (4th Cir. Jan. 5, 2012) (per curiam). Law firm cannot sue bank to recover loss from fake check. The First Circuit held that a law firm could not sue Citibank to recover lost funds from a fraudulent check deposited into the firm’s IOLTA account. Aresty Int’l Law Firm v. Citibank, 677 F.3d 54 (1st Cir. 2012). Parties can waive arbitration notwithstanding a no waiver clause. The Sixth Circuit affirmed a district court’s finding that the defendant had waived its right to arbitration by participating in litigation for eight months. Johnson Assocs. Corp. v. HL Operating Corp., 680 F.3d 713 (6th Cir. 2012). Debt collector may have violated Telephone Consumer Protection Act. The Seventh Circuit held that a debt collector may have violated the TCPA when its automated dialing system contacted cell phone users with reassigned numbers. The debt collector argued that it had the consent of the prior owner and therefore didn’t violate the Act. The court disagreed, noting “there can’t be any longterm consent to call a given cell number, because no one . . . has a property right in a phone number. Consent to call a given number must come from its current subscriber.” Soppet v. Enhanced Recovery Co., 679 F.3d 637 (7th Cir. 2012). Purchaser of mortgage may be a debt collector under the Fair Debt Collection Practices Act. The Sixth Circuit held that a mortgage purchaser may be a “debt collector” liable for violations of the federal Fair Debt Collection Practices Act. The court also noted that although the debt was not actually in default, the FDCPA still applies. “A FDCPA defendant cannot escape coverage under the Act by asserting to the court that the debt was not actually in default, despite having dunned plaintiffs for months or years in the face of plaintiffs’ pleas or proof that the collector has made some error.” Bridge v. Ocwen Fed. Bank, 681 F.3d 355 (6th Cir. 2012). The Sixth Circuit held that a mortgage purchaser may be a “debt collector” liable for violations of the federal Fair Debt Collection Practices Act. Purchaser has three years to rescind under Land Sales Act. [Interstate Land Sales Full Disclosure Act (“ILSFDA”), 15 U.S.C. § 1701] The Fourth Circuit held that purchasers of a lot in an upscale real estate development had three years to exercise their rescission rights under federal law imposing disclosure requirements in interstate land sales. Nahigian v. Juno-Loudoun, LLC, 677 F.3d 579 (4th Cir. 2012). Law firm’s validation notice does not violate Fair Debt Collection Practices Act. The Ninth Circuit held that a validation notice sent by a law firm that implied notice had to be in writing did not violate the FDCPA. The court concluded that a validation notice violates § 1692g(a)(3) only by expressly requiring a consumer to dispute a debt in writing. “We hold that [the firm’s] notice does not violate § 1692g(a)(3) of the FDCPA by impermissibly requiring [the plaintiff] to dispute her debt in writing. The notice does not expressly state such a requirement. Assuming without deciding that the notice could be understood to imply a writing requirement, that implication is part of the statute itself. Such an implicit requirement does not violate § 1692g(a)(3).” Riggs v. Prober & Raphael, 681 F.3d 1097 (9th Cir. 2012). TILA plaintiffs do not need to plead ability to repay. The Tenth Circuit held that home borrowers were not required to plead that they had the ability to repay their loan in order to invoke their rescission rights under the Federal Truth in Lending Act. Sanders v. Mountain Am. Fed. Credit Union, No. 11-4008, 2012 U.S. App. LEXIS 15714 (10th Cir. July 30, 2012). Nursing home can enforce arbitration clause. The Eleventh Circuit held that a nursing home could enforce an arbitration clause signed by a patient upon admission when her estate later sued for wrongful death. Entrekin v. Internal Med. Assocs., No. 11-10730, 2012 U.S. App. LEXIS 16655 (11th Cir. Aug. 9, 2012). Journal of Consumer & Commercial Law 35
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