Chicago Business Litigation Lawyer Blog

Court Dismisses ATM Fee Lawsuit Due to Prior Class Action Settlement Agreement

August 1, 2013 | Peter S. Lubin and Patrick Austermuehle

An Illinois court dismissed a lawsuit against a bank alleging deceptive fees for debit card transactions, ruling that a prior settlement in a class action lawsuit, of which the plaintiff was a class member, barred the suit. Schulte v. Fifth Third Bank (“Schulte 2”), No. 09 C 6655, statement (N.D. Ill., Jun. 15, 2012). The plaintiff acknowledged being part of the class, and by accepting the terms of the settlement agreement, the court held, the plaintiff had released the bank from any further claims related to ATM fees.

The original lawsuit alleged that the defendant “resequenced” debit card transactions during a posting period in an order from highest to lowest, rather than in chronological order. Schulte v. Fifth Third Bank (“Schulte 1”), 805 F.Supp.2d 560, 565 (N.D. Ill. 2011). This meant that the balance of the customer’s account drew down faster, leading to more overdrafts and associated fees. A class action lawsuit commenced in November 2009, and the U.S. District Court for the Northern District of Illinois approved a class settlement agreement in July 2011.

The Schulte 1 settlement applied to customers of the defendant from October 21, 2004 to July 1, 2010. The court applied a five-part test established by the Seventh Circuit Court of Appeals for determining if a class action settlement is fair:

Class Certification Granted in Lawsuit Brought by Identity Theft Victim Against Credit Reporting Agency – Osada v. Experian

July 28, 2013 | Peter S. Lubin and Patrick Austermuehle

A consumer sought to certify two classes in a lawsuit against a credit reporting agency, after the agency allegedly refused to remove negative information from his credit report that was the result of identity theft. The lawsuit asserted various claims under the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. The court certified one of the two classes in Osada v. Experian Information Solutions, Inc., No. 11 C 2856, slip op. (N.D. Ill., Mar. 28, 2012), finding that it met the requirements contained in Rule 23 of the Federal Rules of Civil Procedure.

According to the court’s opinion, the plaintiff learned in late 2008 that unknown parties had taken out two mortgage loans in his name in a total amount greater than $600,000. He contacted the defendant, Experian, regarding how the fraudulent loans would affect his credit report. He also filed a police report, but did not send a copy to Experian. When each mortgage eventually went into foreclosure, the courts handling those matters reportedly realized that identity theft was a factor. The plaintiff submitted an identity theft affidavit to the Federal Trade Commission (FTC) in late 2009 and wrote to Experian in early 2010 requesting removal of the mortgages from his credit report. He attached the FTC affidavit, the police report, and proof of residence to his request.

Federal Court Dismisses Certain State Law Claims in Multidistrict Litigation Case Alleging ATM Overdraft Fee Fraud

July 26, 2013 | Peter S. Lubin and Patrick Austermuehle

A federal judge denied most of a motion to dismiss brought by multiple banks in a consolidated case alleging overdraft fee fraud. In re Checking Account Overdraft Litigation, 694 F.Supp.2d 1302 (S.D. Fla. 2010). The Judicial Panel on Multidistrict Litigation (JPML) consolidated multiple claims into a single matter in the Southern District of Florida in order to deal efficiently with common pretrial matters. The plaintiffs asserted causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing (“GFFD covenant”), and many individual causes asserted common law breach of contract claims and state law consumer protection claims. The defendants filed an omnibus motion to dismiss, which the trial court granted in part and denied in larger part. The court dismissed claims under certain state consumer statutes, as well as claims based on the laws of states in which no plaintiffs lived.

The central issue of the litigation was the ordering of ATM transactions from highest to lowest, regardless of the order in which the account holder performed the transaction. This allegedly reduced the account holder’s total account balance more quickly, garnering more overdraft fees for the defendants. At the time the court rendered its order on the omnibus motion to dismiss, the litigation consisted of fifteen separate complaints, each brought against an individual bank. All of the fifteen complaints pending at the time of the court’s order involved breach of GFFD covenant claims. Five complaints were filed in California as putative class actions on behalf of California customers. Eight complaints were filed outside California, putatively on behalf of nationwide classes excluding California. One complaint was filed by a California resident and sought to represent a nationwide class. The final complaint was filed by a Washington resident on behalf of a class of Washington customers. According to the JPML, the consolidated litigation has involved one hundred separate complaints since 2009, with forty-four still involved as of March 5, 2013.

U.S. Supreme Court Rules that Arbitration Agreement Bars Class Action and Class Arbitration Claims – AmEx v. Italian Colors Restaurant

July 25, 2013 | Peter S. Lubin and Patrick Austermuehle

The United States Supreme Court recently ruled that federal law does not permit a court, based on a finding that individual arbitration is cost-prohibitive for a plaintiff, to strike a class arbitration waiver clause in a contract. American Express Co., et al. v. Italians Colors Restaurant, et al (“AmEx”), 570 U.S. ___, No. 12-133, slip op. (Jun. 20, 2013). The decision builds on prior decisions that have generally affirmed the enforceability of mandatory arbitration clauses, class arbitration waivers, and class action waivers, even in contracts where the bargaining power between the parties is far from equal.

The plaintiffs in AmEx are businesses that accept payments using American Express credit cards. The contract between the plaintiffs and American Express includes clauses requiring submission of all disputes to arbitration and waiving class arbitration procedures. The plaintiffs brought a federal antitrust class action lawsuit against American Express, claiming that the company engages in various monopolistic practices. The defendant brought a motion to compel arbitration under the contract and the Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq. In response, the plaintiffs offered an economist’s declaration stating that the cost of arbitration for an individual merchant asserting a federal antitrust claim would exceed any possible recovery.

Court Awards $6.6 Million to Company Alleging False Advertising, Trademark Infringement, and Cybersquatting – Skydive Arizona, Inc. v. Quattrocchi

July 24, 2013 | Peter S. Lubin and Patrick Austermuehle

The internet, which is still a new phenomenon to many areas of the law, has greatly expanded the potential for infringement of trademarks and personal names. The act of registering someone else’s trademark or personal name as an internet domain name without authorization is known as “cybersquatting.” While proving a case of cybersquatting presents challenges, some plaintiffs have succeeded in court. The Ninth Circuit affirmed part of an Arizona federal court’s decision last year awarding $6.6 million to a plaintiff claiming cybersquatting and other causes of action. Skydive Arizona, Inc. v. Quattrocchi, et al, No. 10-16196, slip op. (9th Cir., Mar. 12, 2012).

The plaintiff, Skydive Arizona, operates one of the world’s largest and best-known skydiving centers in Eloy, Arizona. It has used the “SKYDIVE ARIZONA” mark since 1986. The defendants operate SKYRIDE, which the court called “a third-party advertising and booking service for skydiving centers” around the country. Id. at 2921. SKYRIDE had numerous websites that it used to advertise skydiving events and opportunities in various locations, including several that specifically referenced Arizona, such as PhoenixSkydiving and TempeSkydiving. It also had websites for its own business, including skydivearizona.net and arizonaskydive.com. SKYRIDE had no facilities in Arizona., and it did not do business with the plaintiff.

Class Action Bans Found Improper By Massachusetts’ Highest Court But New Supreme Court Decision Under Cuts that Ruling

July 13, 2013 | Peter S. Lubin and Patrick Austermuehle

With the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion having left many judges and class action attorneys frustrated with the current state of class action lawsuits, a new decision by the Massachusetts Supreme Judicial Court has reawakened hope for plaintiffs to achieve justice in a court of law. According to the new decision by the Court, a class action ban, as part of an arbitration agreement, is only enforceable if the plaintiff cannot provide compelling evidence that the ban on class actions would prevent them from obtaining a remedy under state law.

The Court recently ruled in two cases where the plaintiffs tried to prove that the class action bans in the relevant arbitration agreements were unenforceable. In Feeney v. Dell Inc., the Court ruled in favor of the plaintiffs, having found that they provided sufficient evidence that the ban on class actions would prevent them from pursuing their claims. In another case, Machado v. Systems4 LLC, the Court upheld the class action ban present in the arbitration agreement, having found that the plaintiffs did not provide sufficient evidence that the ban prevented them from obtaining a remedy under state law.

In its decision in Feeney v. Dell Inc., the Court stated that the Supreme Court’s decision in Concepcion did not provide for a general public-policy-based prohibition on class-actions. Instead, the Court decided that the fact that arbitration procedures must not prevent plaintiffs from attaining justice in a court of law remains despite the Supreme Court’s decision in Concepcion.
The Court further denied that this interpretation applies only to federal statutory rights. Instead, it argued that the Federal Arbitration Act does not deny any remedies available under state law. As a result, a state court cannot prevent the Federal Arbitration Act from achieving its intended goals, simply by deciding that certain provisions of an arbitration agreement are unenforceable if those provisions prevent the assertion of claims provided by relevant state laws.

The court therefore decided that the enforceability of class action bans as part of arbitration agreements would be dependent upon “case-specific factual showings” that the ban would prevent plaintiffs from obtaining remedies which are granted to them by state law. In Feeney v. Dell Inc., a case involving small-dollar claims, the court determined that the class action ban would effectively prevent the plaintiffs from pursuing their claims, as individuals are unlikely to pursue lengthy and often costly litigation for insubstantial amounts. The case of Machado v. System4 LLC, on the other hand, consisted of significantly larger monetary claims, of the sort that individuals are likely to pursue in court, even without the added power of a class action. The court, therefore, determined that, in such a case, the class action ban present in the arbitration agreement remained valid.

The Massachusetts Supreme Judicial Court is not alone in this interpretation of the law. The Missouri Supreme Court and the Second Circuit have also recognized that circumstances exist in which a class action ban cannot be upheld in a court of law. However, the Second Circuit’s decision in Amex that a class action ban which prevents the attainment of rights granted by federal law is unenforceable was just reversed by the Supreme Court. The decision that the Supreme Court has reached in Amex undercuts the reasoning using by the Massachusetts Supreme Judicial Court and allows class-action bans in arbitration agreements all over the nation to preclude class actions from proceeding, even if they are the only means of providing a means for protecting the rights at issue. The Supreme Court has provided businesses with a means of protecting themselves from expensive class action litigation.

Milwaukee News Story on Our Client’s First Amendment Victory in Federal Court — Our Chicago Libel, Slander and Defamation Lawyers Fight to Protect Our Clients’ First Amendment Rights

July 12, 2013 | Peter S. Lubin and Patrick Austermuehle

Our Client’s Crusade to Protect His First Amendment Rights Will Be Featured on Milwaukee News Channel Tonight

July 12, 2013 | Peter S. Lubin and Patrick Austermuehle

//www.youtube.com/watch?v=dsN1s-OvdKs

Our client David Bates was sued by Chicago Motor Cars for criticizing the used car dealership online. We represented him in federal court and arbitration where he prevailed. He continues to exercise his First Amendment rights to criticize the dealership and is seeking to expose what he believes are unethical business practices and to support his position with evidence and judgments from court cases against the dealership. There are a number of court judgments finding that the dealer engaged in consumer fraud as to customers other then David Bates which we uncovered in our investigation.

In the federal court case the dealer filed a false affidavit claiming that it had never even been sued for fraud even though, in truth, these fraud judgments had entered against it relating to customers other than David Bates. The federal judge hearing the case entered a rule to show cause against the dealer requiring it to demonstrate why it should not be sanctioned for filing an allegedly false affidavit. The Court indicated that it might consider entering the sanction of dismissing the case along with sanctions against the dealer.

At that point, the dealer facing the impossible task of explaining why it had filed a false affidavit. Chicago Motor Cars decided to drop the case. It settled the federal court case by releasing all of its money damages claims against David Bates and his girl friend.

We then headed to arbitration where the Arbitrator, a retired judge, ruled that Bates’s videos,which were the subject of the arbitration, did not defame Chicago Motor Cars and were essentially true with any minor inaccuracies being irrelevant. Given Chicago Motor Cars’s documented history of fraud judgments entered against it and Chicago Motor Cars’s admissions in deposition and arbitration testimony regarding those judgments for fraud, the Arbitrator ruled against Chicago Motor Cars. He held that all of Bates’s many videos, which were the subject of the arbitration hearing, could remain posted on the internet. Mr. Bates’s First Amendment right to speak his mind and voice his opinions, even using harsh language, was vindicated. Consumers have a right to know that the business they are dealing with has a history of fraud judgments and to take that information into account in making a major purchase decision for a luxury, high priced car. Chicago Motor Cars’s owners admitted when we cross examined them that Bates had a First Amendment right to publish on the internet facts about the fraud judgments entered against Chicago Motor Cars.

Court Denies Motion to Dismiss Appeal of Class Decertification, Finding that Plaintiffs Who Already Settled Still Had Standing – Espenscheid v. DirectSat USA

July 12, 2013 | Peter S. Lubin and Patrick Austermuehle

In an appeal of the decertification of a class action lawsuit, a federal appeals court denied a motion to dismiss the appeal for lack of jurisdiction, finding that the plaintiffs/appellants, who settled with the defendants after decertification, still had a stake in the litigation. Espenscheid v. DirectSat USA, LLC, 688 F.3d 872 (7th Cir. 2012). The plaintiffs claimed that they were entitled to an “incentive award” or “enhancement fee” for serving as class representatives, but only if the case was certified as a class action. Id. at 874-75. This gave them an ongoing stake in the litigation, they argued, and therefore gave them standing to appeal decertification. The court agreed, finding that dismissing their appeal on standing grounds would not serve judicial economy, as another class member could simply step in and appeal.

Judge Richard Posner, writing for the court, does not say much about the underlying lawsuit, except that it consists of both class action and collective action claims. The three named plaintiffs brought collective action claims against the defendant for alleged violations of the federal Fair Labor Standards Act, and class action claims for supplemental state law claims. The difference between a class action and a collective action under federal law, the court notes, is not particularly relevant to the question at hand.

Rapper Ordered to pay $1 Million Plus Reward Allegedly Tries to Evade Judgment

July 12, 2013 | Peter S. Lubin and Patrick Austermuehle

While an offer of reward might not be viewed as a contract (much less a reward offered via social media sites such as Twitter and YouTube), such an offer can still be considered binding. That is the claim made by Armin Augstein who found and returned the laptop belonging to the “Diamond Girl” singer, Ryan Leslie.

The laptop went missing in October 2010 from the back of a Mercedes S350 that was briefly left unattended when Leslie was escorted by security into a nightclub in Cologne, Germany. The bag containing the laptop also held $10,000 in cash and Leslie’s passport. But it was the computer and the hard drive, which contained the rapper’s music, that Leslie was anxious to have returned to him. He initially offered a $20,000 reward for the return of the MacBook. Then he took to Twitter and YouTube to announce that the reward had been increased to $1 million.

52-year-old German Armin Augstein said he found the laptop on a park bench while walking is dog in Stommelerbusch, Germany, about a month after the laptop went missing. The rapper allegedly reneged on his promise of the $1 million reward, claiming he couldn’t retrieve his recording sessions from the hard drive. Augstein then sued the Harlem-based musician for backing out of his promise of a reward to whomever should return the laptop. Michael Fischman, Augstein’s U.S.-based attorney, was quoted at the time as saying that it was “unfortunate that my client has to go to such lengths to recover the reward.” The lawsuit, which was filed in U.S. District Court in Manhattan and sought the $1 million reward, plus interest and listed Ryan Leslie and his company, NextSelection, as defendants.

A New York federal jury ruled in favor of Augstein’s claim for the reward in 2012 and ordered Leslie and NextSelection to pay Augstein $1.18 million. Leslie has still refused to pay up though, and Augstein is now accusing the R&B artist of hiding funds in order to avoid paying him the court-ordered reward. Augstein has recently asked state judges to order Leslie to pay the promised reward from funds held by Les is More, the corporation that pays all of Leslie’s personal bills. The lawsuit, which was filed in Manhattan Supreme Court, alleges that “Les is More was formed to replace NextSelection and thereby shield (Leslie’s) assets.”

While many people insist on having certain promises made in writing for fear that, otherwise, there will be no way to make sure the person making the promise comes through on their end of the deal, such lengths are not always necessary. Many courts recognize verbal contracts and, in a scenario such as this one, where there is a digital record of the promise, a case can easily be made that a contract was entered into. Leslie’s tweet and YouTube video led Augstein to reasonably believe that he would receive a substantial reward in return for returning the musician’s MacBook and hard drive, regardless of whether anything could be retrieved from them.