Commercial Litigation Alert Blog

New Jersey Supreme Court’s “Aggrieved Consumer” Ruling Will Erode TCCWNA Class Actions

New Jersey Supreme Court’s “Aggrieved Consumer” Ruling Will Erode TCCWNA Class Actions

The New Jersey Supreme Court’s April 16, 2018 decision in Spade v. Select Comfort (consolidated with Wenger v. Bob’s Discount Furniture, LLC), entirely destroys the viability of “no injury” class actions under the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”) and will also surely erode the viability of TCCWNA class certification more broadly. Via referred questions from the Third Circuit Court of Appeals, the N.J. Supreme Court held that in order to be an “aggrieved consumer” under the TCCWNA, a plaintiff must demonstrate an adverse consequence caused by an unlawful provision in a consumer contract or other writing. The TCCWNA essentially prohibits businesses from including in any written consumer contract, warranty, or sign any provision that “violates any clearly established legal right of a consumer or responsibility of a seller” or other business. N.J.S.A. § 56:12-15. Although the TCCWNA on its face appears to only allow an “aggrieved consumer” to sue to recover a “civil penalty” of not less than $100 or actual damages, this Statute has been used—some might say abused—with increasing frequency by the plaintiff class action bar to bring “no injury” class actions premised solely upon the existence of a contract containing some unenforceable or...

Enough Said: Southern District of New York Decision Reiterates Limits of Disclosure Obligations Under Securities Laws

Enough Said: Southern District of New York Decision Reiterates Limits of Disclosure Obligations Under Securities Laws

The Southern District of New York’s recent decision in Employees Retirement System of the City of Providence v. Embraer S.A. may provide useful guidance for companies struggling with disclosure obligations in the midst of ongoing investigations into potential unlawful conduct. Defendant Embraer, S.A., a Brazilian aircraft manufacturer, made a series of disclosures regarding external and internal investigations into potential U.S. Foreign Corrupt Practices Act (FCPA) violations. Specifically, in November 2011, Embraer disclosed investigations by the U.S. Department of Justice (DOJ) and Securities and Exchange Commission (SEC) and advised that it had retained outside counsel to conduct an internal investigation. Although the company repeatedly warned that it may be required to pay substantial fines or incur other sanctions, it also stated early in the investigation that it did not believe there was a basis to estimate reserves or quantify any loss contingency. In July 2016, Embraer announced that settlement negotiations with the DOJ and SEC had progressed to a point warranting recognition of a $200 million loss contingency. Nearly three months later, the company announced a settlement that included a fine of over $107 million and disgorgement of nearly $84 million in profits. On December 13, 2016, Employees’ Retirement System of the...

TCPA Update: When Revocation of Consent Is Unreasonable

TCPA Update: When Revocation of Consent Is Unreasonable

The District of New Jersey recently made clear that when attempting to cancel unwanted commercial text messages, if the recipient does not follow the sender’s simple instructions, any other attempts to revoke consent to the text messages may be found unreasonable. In Rando v. Edible Arrangements International, LLC, a class action lawsuit claiming violations of the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, et seq., plaintiff claimed that she was sent commercial text messages from defendant using an automatic telephone dialing system (“ATDS”). Though plaintiff had originally consented to receive such text messages, and never followed defendant’s instruction to text “STOP to cancel,” the complaint alleged that plaintiff had revoked her consent to receive the messages via other return text messages of varying content and that defendant had impermissibly designated an exclusive means for the revocation of consent.” The Rando court held that the complaint failed to state a TCPA claim by failing to allege that the plaintiff’s chosen method of revoking consent was reasonable. Plaintiff had replied to the text with language which would clearly indicate to a human being that she wanted to revoke her consent, but she did not text back “STOP” as instructed in...

No Harm to Competition: Third Circuit Upholds Decision for Uber in Antitrust Challenge by Philadelphia Taxicab Drivers

No Harm to Competition: Third Circuit Upholds Decision for Uber in Antitrust Challenge by Philadelphia Taxicab Drivers

The Third Circuit’s newly-issued precedential opinion in Philadelphia Taxi Association v. Uber Technologies, Inc. is a classic reminder that the antitrust laws protect against harm to competition – not harm to competitors. In 2016, a group of Philadelphia taxicab drivers sued Uber in federal district court, alleging that the ride-sharing service was unlawfully attempting to monopolize the vehicle-for-hire market in Philadelphia. Plaintiffs pointed to the fact that, in October 2014, just prior to Uber’s entry into Philadelphia, there were 7,000 taxi drivers, and each of the city’s 1,610 taxicab medallions was valued at an average of $545,000. Two years later, 1,200 medallion taxi drivers had fled to Uber, those still driving taxis saw a thirty percent decline in their earnings, and the value of a medallion plummeted to just $80,000. The district court dismissed the complaint, holding that the plaintiffs had not pled antitrust injury – i.e., harm that the antitrust laws are designed to prevent – and thus did not have antitrust standing to maintain their suit. This appeal followed. The Third Circuit affirmed the dismissal but, unlike the district court, did so first based on plaintiffs’ failure to plausibly allege the elements of their attempted monopolization claim – i.e.,...

D.C. Circuit’s Rejection of FCC’s 2015 “Autodialer” Definition is Welcome News for Businesses in TCPA Class Actions

D.C. Circuit’s Rejection of FCC’s 2015 “Autodialer” Definition is Welcome News for Businesses in TCPA Class Actions

On March 16, 2018, the D.C. Circuit Court of Appeals issued a long awaited decision in its review of the Federal Communications Commission’s (FCC) 2015 Declaratory Ruling and Order, which among other things, had sought to clarify various aspects of the Telephone Consumer Protection Act’s (TCPA) general bar against using automated dialing devices (ATDS) to make uninvited calls or texts messages. The FCC’s 2015 Order was largely viewed by businesses as having greatly expanded the scope of the TCPA, opening the floodgates of class action litigation against businesses utilizing virtually any type of text messaging to communicate ads to customers. In ACA International v. FCC, the D.C. Circuit, among other things, struck down the Commission’s broad definition of autodialer. The TCPA generally makes it unlawful to call a cell phone using an ATDS, i.e., “equipment which has the capacity-(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” Id. § 227(a)(1). The FCC’s 2015 Order declined to define a device’s “capacity” in a manner confined to its “present capacity,” but rather, construed a device’s “capacity” to encompass its “potential functionalities” with modifications such as software changes. Thus,...

Third Circuit Awards $10 Million to Plaintiff on Summary Judgment in Recent RICO Case

Third Circuit Awards $10 Million to Plaintiff on Summary Judgment in Recent RICO Case

The Third Circuit recently affirmed a summary judgment in favor of a plaintiff for more than $10 million in damages on federal and state RICO claims. In the process, the court shed light on what evidence shows an “intent to defraud a financial institution” as required to establish bank fraud. In Liberty Bell Bank v. Rogers, et al., a bank sued an individual and entities he owned and controlled, alleging, among other things, violations of the federal and New Jersey RICO statutes. The bank alleged that the defendants developed a scheme through which they fraudulently obtained loans from the bank and further defrauded it by making payments on the loans using a check-kiting scheme. On a motion for summary judgment – in response to which the individual pro se defendant failed to file a responsive statement of material facts, thereby enabling the court to deem certain facts admitted – the district court entered summary judgment in favor of the bank, holding the defendants jointly and severally liable to the bank for more than $10 million, plus attorneys’ fees and costs. The defendants appealed, and the Third Circuit affirmed. In particular, the court affirmed the district court’s finding that defendants had...

Plaintiffs No Longer Need a “Nexus” to Pennsylvania in Order to Bring Claims Under the Unfair Trade Practices and Consumer Protection Law

Plaintiffs No Longer Need a “Nexus” to Pennsylvania in Order to Bring Claims Under the Unfair Trade Practices and Consumer Protection Law

In answering a certified question from the Third Circuit, the Pennsylvania Supreme Court recently issued a decision that greatly expands the reach of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (UTPCPL). In Danganan v. Guardian Protection Services, the Supreme Court held that “a non-Pennsylvania resident may bring suit under the UTPCPL against a [Pennsylvania]-headquartered business based on transactions that occurred out-of-state.” Plaintiff Danganan contracted with Guardian Protection Services (“Guardian”), a Pennsylvania-headquartered business, for home security equipment and services at the plaintiff’s then-home in Washington, DC. The contract contained, inter alia, a choice-of-law provision, stating that the “Agreement shall be governed by the laws of Pennsylvania.” After moving to California, the plaintiff attempted to cancel the agreement, but Guardian continued to bill the plaintiff, claiming the agreement authorized ongoing charges through the contract’s term, regardless of cancellation attempts. The plaintiff brought suit in Pennsylvania state court, and Guardian removed the matter to the United States District Court for the Western District of Pennsylvania. Guardian then moved to dismiss, arguing that the plaintiff had not, pursuant to the UTPCPL, demonstrated a “sufficient nexus” between Pennsylvania and the improper conduct alleged in the complaint. The district court agreed and dismissed the complaint....

Delaware Supreme Court Gives Preclusive Effect to Federal Court  Dismissal of Derivative Suit for Failure to Show Demand Futility

Delaware Supreme Court Gives Preclusive Effect to Federal Court Dismissal of Derivative Suit for Failure to Show Demand Futility

In its highly anticipated opinion in California State Teachers’ Retirement System v. Alvarez, the Delaware Supreme Court unanimously affirmed the dismissal of a group of Delaware shareholders’ derivative actions, holding that a previous dismissal by a federal court for failure to plead demand futility precluded other shareholders from pursuing additional derivative actions so long as the other shareholders were adequately represented in the earlier suit. Following the New York Times 2012 exposure of Wal-Mart executives’ alleged mishandling of bribery allegations, Wal-Mart shareholders brought derivative suits in the Western District of Arkansas and the Delaware Court of Chancery. In May 2015, the Arkansas court dismissed the case before it, because the shareholders had failed to adequately plead demand futility. Prompted by the Arkansas dismissal, the Delaware Court of Chancery initially dismissed the Delaware action, but, after some ping-ponging back and forth between the Court of Chancery and the Delaware Supreme Court, the Court of Chancery issued a supplemental opinion, recommending that the Supreme Court adopt a rule proposed in EZCORP Inc. Consulting Agreement Deriv. Litig., which held that constitutional Due Process permits a derivative suit to have a preclusive effect on a subsequent derivative suit only if the plaintiff in the first...

Wide of the Goal: Second Circuit Says No to Soccer League’s Request for Preliminary Injunction in Antitrust Suit

Wide of the Goal: Second Circuit Says No to Soccer League’s Request for Preliminary Injunction in Antitrust Suit

Coming, coincidentally, just days before the start of the 2018 Major League Soccer season, the recent Second Circuit decision in North American Soccer League, LLC v. United States Soccer Federation, Inc. has key takeaways for antitrust and injunction law practitioners. As the governing body for soccer in the U.S. and Canada, the United States Soccer Federation (U.S. Soccer) promulgates Standards, tied to the number and location of a league’s teams, that it uses to designate leagues as Division I, II, or III each year. Major League Soccer (MLS) has been the only D-I men’s soccer league since it began play in 1995, while the North American Soccer League (NASL), despite aspirations to compete directly against MLS, has operated since 2011 as a D-II league. Last year, U.S. Soccer rejected NASL’s application for a D-II designation for the 2018 season. Rather than filing instead for D-III status, NASL sued U.S. Soccer in federal court in Brooklyn, alleging that U.S. Soccer violates Section 1 of the Sherman Antitrust Act by selectively applying its Standards to restrain competition among top-tier U.S. men’s professional soccer leagues. As part of its lawsuit, NASL sought a preliminary injunction requiring U.S. Soccer to grant it D-II status for...

Ninth Circuit Reverses $200 Million Settlement and Class Certification For Lack of Proper Choice of Law Analysis

Ninth Circuit Reverses $200 Million Settlement and Class Certification For Lack of Proper Choice of Law Analysis

In a decision that may make it harder to settle cases on behalf of nationwide classes, the Ninth Circuit recently overturned a $200 million class action settlement and vacated the certification of a nationwide class of consumers, finding the district court failed to examine whether different states’ laws applied to the class members’ claims and whether Rule 23’s predominance requirement was satisfied. The dispute was rooted in a 2012 investigation which found that Hyundai and Kia deviated from U.S. Environmental Protection Agency fuel economy testing protocols and overstated the fuel efficiency estimates in advertisements and car window stickers for certain 2011, 2012, and 2013 vehicles. A California federal court approved the settlement in June 2015. However, in In re Hyundai and Kia Fuel Economy Litigation, a split three-judge panel of the Ninth Circuit vacated the District Court’s approval order and certification of a nationwide class of consumers. Five objectors appealed from the class settlement arguing, among other things, that the settlement violated consumer rights in states other than California. The Ninth Circuit held that the District Court erred by failing to apply California’s choice of law rules to determine whether California law could apply to all plaintiffs in a nationwide class...