Consumer Fraud/Consumer Protection

Midwest Insurers Have Duty to Defend in Junk Fax Class-Action Suits

May 25, 2008 | Peter S. Lubin and Patrick Austermuehle

The Illinois Supreme Court handed a victory to plaintiffs throughout Illinois with its 2006 ruling in an insurance dispute over whether insurers must cover the costs of a junk fax class action lawsuit for an insured covered for an “advertising injury.” In Valley Forge Insurance Co. v. Swiderski Electronics, Inc., 2006 Ill. LEXIS 1655, the state Supreme Court ruled that business insurers have a duty to defend “junk fax” class action lawsuits.

The underlying dispute in the Illinois Supreme Court case started when private investigator Ernie Rizzo filed a proposed class action lawsuit against Swiderski Electronics for sending him “junk faxes.” Unsolicited advertisements sent via fax violate both the federal Telephone Consumer Protection Act and the Illinois Consumer Fraud and Deceptive Business Practices Act. Swiderski had an insurance policy from Valley Forge Insurance Company, which insured Swiderski against a personal or advertising injury that arises out of “Oral or written publication, in any manner, of material that violates a person’s right of privacy[.]” The insurer claimed that because the faxes had not revealed Rizzo’s own personal information, they did not invade his privacy and thus were not covered. They also claimed that sending information via fax does not constitute publication.

The insurer asked a trial court for a declaratory judgment stating it was not obligated to cover Swiderski; all parties filed cross-motions seeking summary judgment. The trial court ruled in favor of Swiderski, as did the appellate court and, eventually, the Illinois Supreme Court. That court rejected Valley Forge’s arguments, rejecting the claim that faxing is not “publication,” using the plain meaning of the word. It also ruled that privacy under the federal TCPA and caselaw includes the right to be left alone:

Seventh Rules Credit Must Be Firm, But Not Valuable Under FCRA

May 24, 2008 | Peter S. Lubin and Patrick Austermuehle

The Seventh U.S. Circuit Court of Appeals recently issued an opinion limiting class-action lawsuits regarding “firm offers of credit” under the federal Fair Credit Reporting Act. In Murray v. New Cingular Wireless Services, 2008 WL 1701839 (7th Cir. April 16, 2008), the Seventh Circuit also limited the scope of its 2004 decision in Cole v. U.S. Capital, Inc., 389 F.3d 719 (7th Cir. 2004). In that decision, the court said that when companies offer “a token line of credit” along with consumer goods, that credit offer must have value to the customer.

Among the issues addressed by the court are:

* Under Cole, an offer of credit entangled with an offer of merchandise must be valuable. However, Cole does not apply to “pure offers of credit” not entangled with another offer. The FCRA requires only that an offer of credit be firm, not that it be valuable to most or all of its recipients.

The Chicago Consumer Attorneys at Lubin Austermuehle Win Precedent In Hotel Billing Fraud Case

May 23, 2008 | Peter S. Lubin and Patrick Austermuehle

Our firm obtained a favorable verdict in a consumer fraud case with Terrill v. Oakbrook Hilton Suites & Garden Inn 788 NE2d 789 (2nd Dist 2003). In that case, our client, Cathy Terrill, was overcharged for a hotel room; her bill contained a charge for “taxes” that included an undisclosed non-tax charge for security services. This case was part of a set of class actions in Du Page County from 2000 to 2007 (Oakbrook Terrance Hotel Overcharge Class Actions), all of which alleged that hotels misled and overcharged their customers by including non-tax charges as “taxes” on their bills.

In Terrill, the Oakbrook Terrace Hilton moved for summary judgment at the trial court, claiming the Hotel Operators Occupation Tax Act (35 ILCS 145/3(f)) and Illinois Supreme Court precedent barred Terrill’s suit. The trial judge denied that motion and the hotel appealed. It claimed that because the security fees paid for extra security from Oakbrook Terrace law enforcement — a local government entity with the power to collect taxes — it had already paid the extra money to the state Department of Revenue and could not be sued.

The Illinois Second District Court of Appeal rejected that argument, calling it “untenable at best”:

FACTA Class Actions Grow

May 23, 2008 | Peter S. Lubin and Patrick Austermuehle

Since the Fair and Accurate Credit Transactions Act took full effect in 2006, businesses have seen a rapid growth in class-action lawsuits over credit card numbers printed on receipts. FACTA, which was intended to help prevent identity theft, requires businesses that accept credit cards to hide all but the last five digits of the card number on receipts, and not to print the expiration date at all.

Businesses that failed to meet those requirements in time were hit with hundreds of class actions within the first year of the law’s effective date in December of 2006. Restaurants, at which consumers regularly and normally leave credit card receipts, have been an especially frequent defendant. The actions allege that businesses in violation of FACTA are willfully disregarding the law because they had several years to comply, and ask for up to $1,000 for each violation. Federal appeals courts split on the matter of whether a business’s unintentional failure to comply with FACTA was “willful,” but the U.S. Supreme Court decided in 2007’s Geico v. Edo, 551 U.S. __ (2007), an appeal from the Ninth U.S. Circuit Court of Appeals, that a willful violation may be “reckless disregard” for the law as well as a knowing or intentional violation.

Senator Charles Schumer of New York introduced legislation on May 6, 2008 that would end liability for businesses that print expiration dates but comply with the requirement to shorten credit card numbers. The proposed Credit and Debit Card Receipt Clarification Act of 2008 would declare any business that printed the expiration date but not the entire number to be “not in willful noncompliance” with FACTA. It would apply to any unresolved lawsuit, regardless of when that lawsuit was filed.

Pennsylvania District Court Certifies Health Club Fee Class Action

May 23, 2008 | Peter S. Lubin and Patrick Austermuehle

As billing fraud class action attorneys, we were pleased to see that a Pennsylvania federal district court recently certified a class in a lawsuit alleging three health clubs in Pennsylvania charged excessive startup fees. In Allen v. Holiday Universal, the court certified a class of all plaintiffs who joined a Bally Total Fitness in Pennsylvania (which includes Holiday Universal, Inc. and Scandinavian Health Spa gyms) on or after December 7, 1998 and paid more than $100 in startup costs.

In a 63-page Memorandum of Order, U.S. District Judge Gene Pratter of the Eastern District of Pennsylvania rejected several arguments raised by the defense that the class should not be certified. Among those arguments were:

* Club members with different contracts were too different to form a class.

Expose of Illegal Debt Collector Tactics — FTC Website Summarizes Consumer Right to be Free From Debt Collector Harrassment

May 16, 2008 | Peter S. Lubin and Patrick Austermuehle

Illegal debt collection practices exposed:

The Federal Trade Commission’s (“FTC”) website summarizes illegal debt collection practices. Below is the summary from the site:

Fair Debt Collection