Consumer Law Update

With the summer breaks in the rearview mirror and new court term beginning, we thought we would recap the significant consumer protection cases that we have seen this year.

As expected, following the United States Supreme Court’s decision in Spokeo, Inc. v. Robins, the defense bar has ramped up challenges based on standing.  The results have been mixed.  On the positive side for consumers, first there was Mey v. Venture Data, LLC, No. 5:14-CV-123, 2017 WL 1193072 (N.D.W.Va. Mar. 29, 2017) where Judge Bailey held that unwanted phone calls cause concrete harm under the Telephone Consumer Protection Act and satisfy Spoke’s standing requirement.  Thereafter, in Wilson v. MRO Corp., No. CV 2:16-5279, 2017 WL 1534202 (S.D.W.Va. Apr. 27, 2017), Judge Copenhaver found standing through an agency relationship where clients alleged that they were overcharged for medical records obtained by their attorney.  The district court went on to find that plaintiffs need only be “persons” and not “consumers” to state a claim under Article 6 of the West Virginia Consumer Credit and Protection Act.

However, the West Virginia Supreme Court was not as kind to the plaintiff in a similar case alleging excessive charges for medical records.  In State ex rel. Healthport Techs., LLC v. Stucky, 239 W.Va. 239, 800 S.E.2d 506 (2017), the court simply held that the client did not pay the invoice herself and had suffered no demonstrable personal loss caused by the allegedly illegal fee; thus, no injury-in-fact could be shown. The client, therefore, did not have standing to pursue the lawsuit.  Similarly, in Young vs. EOSCCA, No. 16-0151 (W.Va. May 17, 2017), the court held that a plaintiff must meet the statutory definition of “consumer” to seek damages and statutory penalties pursuant to the provisions of Article 5 of the WVCCPA.

Two Fourth Circuit cases also went against consumers.  In Dreher v. Experian Info. Sols., Inc., No. 15-2119, 2017 WL 1948916 (4th Cir. May 11, 2017), the court held that a credit reporting agency’s failure to identify the source of information on an individual’s credit report–without more–does not create sufficient injury-in-fact under the Fair Credit Reporting Act to confer Article III standing.  And in Beck v. McDonald, 848 F.3d 262 (4th Cir. 2017), the court held that an allegation that data breaches created an enhanced risk of future identity theft was too speculative to constitute an injury-in-fact.  However, that holding appeared to be driven by specific facts.

Arbitration seems to be a hot topic every year, and this year has been no different.  We again start with the pro-consumer cases.  In Goodwin v. Branch Banking & Trust Co., No. 5:16-CV-10501, 2017 WL 960028 (S.D.W.Va. Mar. 10, 2017), Judge Berger held a BB&T arbitration agreement unconscionable where “[c]ollectively, the terms are well beyond the reasonable expectations of an ordinary person.”  The terms included: an artificially short statute of limitations, lack of mutual obligation of the parties to arbitrate, a “loser pays” fee shifting provision, and one-sided qualification requirements for the arbitrator.  The court found a sufficient degree of procedural unconscionability due to the disparity in bargaining power between the parties and a rushed loan closing.  Likewise, Dillon v. BMO Harris Bank, N.A., No. 16-1362, 2017 WL 1903475 (4th Cir. May 10, 2017) was an easy call for the Fourth Circuit. It found that a choice of “tribal law” provision in an arbitration agreement required by an on-line lender rendered the agreement to arbitrate unenforceable as it acted as a waiver of all federal statutory rights.

Back in the state supreme court, we saw two significant arbitration decisions go against consumers.  In Citizens Telecommunications Co. of West Virginia v. Sheridan, No. 16-0005, 2017 WL 1457006 (W. Va. Apr. 20, 2017), the court declined to extend its decision in State ex rel. U-Haul Co. of West Virginia v. Zakaib, finding instead that a class of consumers assented to arbitration by way of unilateral contracts in the form of what are known as “bill stuffers” (contractual language changing the terms of service that are included in a monthly service invoice).  The court went on to find mutual commitment to the arbitration clause was sufficient consideration for the unilateral change of terms and that the newly drafted arbitration clause applied retroactively to preexisting claims.  In West Virginia CVS Pharmacy, LLC v. McDowell Pharmacy, Inc., 238 W. Va. 465, 796 S.E.2d 574 (2017), applying Arizona law, the court found an arbitration agreement was properly incorporated into a contract.  Despite the absence of any “delegation clause,” the court further held that the “incorporation of the AAA rules furnishes clear and unmistakable evidence that the parties intended to delegate gateway issues of arbitrability to the arbitrator.”

Turning to decisions on the merits, local courts declared a number of wins and losses for consumers.

First the consumer wins.  Rejecting a number of arguments pertaining to class certification and the measure of civil penalties, the district court awarded a fairly large class of consumers $3,500 per loan they entered into plus the return of their appraisal fees in Alig vs. Quicken Loans, Case No. 5:12-cv-114 (N.D.W.Va. 7/11/2017).  In Quicken Loans, Inc. v. Walters, 239 W. Va. 494, 801 S.E.2d 509 (2017), the West Virginia Supreme Court issued a new syllabus point holding that the loan-to-value protections set forth in W.Va. Code 31-17-8(m)(8) prohibit “any primary or subordinate mortgage loan that exceeds the fair market value of the [residential] property at the time the loan is made, either singularly, in the case of a first or consolidation mortgage loan, or in combination with any outstanding balances of any other existing loans.”  Furthermore, even though the uninspiring verdict netted the plaintiff nothing after a settlement offset, the court affirmed that the plaintiff was the “prevailing party” sufficient to support a substantial award of attorney fees, as a statutory violation was the only prerequisite to such an award.  Finally, the Fourth Circuit in Daugherty v. Ocwen Loan Servicing, LLC, No. 16-2243, 2017 WL 3172422 (4th Cir. July 26, 2017) allowed a punitive damage award of $600,000 in a Fair Credit Reporting Act case where just over $6,000 in compensatory damages was awarded by the jury.

And now the losses.  In Perez v. Figi’s Companies, Inc., No. 5:15-CV-13559, 2017 WL 1591894 (S.D.W.Va. Apr. 28, 2017), the district court held that an attempt to collect unlawful fees requires specific communication of such fees to be actionable.  The court declined to accept the plaintiff’s premise that any communication after an initial imposition of an unlawful fee is an implicit attempt to collect that unlawful fee, and, thus, another violation of the provisions barring such collection.  From a practical sense, the court concluded that, by not answering the phone, the consumer did not give the debt collector an opportunity to demand that she pay unlawful fees in violation of the Act.  Similarly, the West Virginia Supreme Court found in Valentine & Kebartas, Inc. v. Lenahan, 239 W. Va. 416, 801 S.E.2d 431 (2017) that a large volume of unanswered calls from a debt collector (250 unanswered calls over an eight-month period) did not by itself establish an intent to annoy, abuse, oppress or threaten the consumer in violation of W. Va. Code § 46A-2-125(d).

Observation:  In all, consumers won 7 of the 15 cases that we reviewed.  As a whole, the results are unremarkable.  What is noteworthy, however, is that consumers prevailed on only 1 of 6 cases before the West Virginia Supreme Court and fared much better in the federal system, tallying 6 wins compared to just 3 losses.  As a result, an uptick in federal court filings of consumer cases in West Virginia is expected.

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