Justia U.S. 6th Circuit Court of Appeals Opinion Summaries

Articles Posted in Consumer Law

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Plaintiffs own two dental practices, several properties that generate rental income, a sports bar, and an indoor basketball gymnasium that they rent out as an event center. Around 2009, they began “buying property” and obtained a $300,000 commercial line of credit from First Southern. In 2013, Plaintiffs sought a loan from Southern to convert a vacant former hotel into apartment units and commercial spaces. Southern approved a “maximum total principal balance” that “will not exceed $1,013,519.00.” Plaintiffs later sought additional funds to complete the renovation. A revised total estimated cost was $1,654,648.65, approximately $712,000 above the total cost for the project represented in Plaintiffs’ loan application. Southern then learned about Plaintiffs’ additional debt burden, refused to loan additional funds, and declined to extend the maturity date on the line of credit. After Scott paid off his debts with Southern, Southern’s automated computer system continued to report Scott’s entire prior payment history, including that he had previously been delinquent on his loans. Southern represented to Plaintiffs that it had contacted a consumer credit agency about the error. The Sixth Circuit affirmed summary judgment in favor of the defendants in a suit under the Fair Credit Reporting Act, 15 U.S.C. 1681. Plaintiffs never notified a consumer reporting agency about their dispute, a prerequisite for prevailing under the Act, which preempts state common law claims involving reporting to consumer reporting agencies. View "Scott v. First Southern National Bank" on Justia Law

Posted in: Banking, Consumer Law

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The Sparkses own property subject to a homeowners’ association. When they fell behind on their assessments, the Association engaged Equity Experts to collect that debt. Equity Experts also sought to collect from the Sparkses the $270 fee it charges the Association for its collection services; the Sparkses contend that those attempts violated the Fair Debt Collection Practices Act (FDCPA). That Act prohibits debt collectors from attempting to collect debts not “expressly authorized by the agreement creating the debt or permitted by law,” 15 U.S.C. 1692f(1). The Sixth Circuit affirmed summary judgment in favor of Equity Experts. The agreement at issue expressly authorizes the Association to collect its “costs.” The Declaration’s use of “costs” is best read in its ordinary sense to mean all “costs of collection,” and not just taxable “legal costs.” The Sparkses did not argue that Equity Experts’ fees were unreasonably high, nor did they provide substantial evidence of an understanding between Equity Experts and the Association that the Association would never actually have to pay the collection fees. View "Melvin Sparks v. EquityExperts.org, LLC" on Justia Law

Posted in: Consumer Law

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Louisiana-Pacific produces “engineered-wood” building siding—wood treated with zinc borate, a preservative that poisons termites; Hardie sells fiber-cement siding. To demonstrate the superiority of its fiber cement, Hardie initiated an advertising campaign called “No Wood Is Good,” proclaiming that customers ought to realize that all wood siding—however “engineered”—is vulnerable to damage by pests. Its marketing materials included digitally-altered images and video of a woodpecker perched in a hole in Louisiana-Pacific’s siding with nearby text boasting both that “Pests Love It,” and that engineered wood is “[s]ubject to damage caused by woodpeckers, termites, and other pests.” Louisiana-Pacific sued Hardie, alleging false advertising, and moved for a preliminary injunction. The Sixth Circuit affirmed the denial of the motion. Louisiana-Pacific failed to show that it would likely succeed in proving the advertisement unambiguously false under the Lanham Act and the Tennessee Consumer Protection Act. View "Louisiana-Pacific Corp. v. James Hardie Building Products, Inc." on Justia Law

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Fifth Third Bank’s “Early Access” program is a short-term lending option for certain customers who hold eligible checking accounts. Fifth Third deposited Early Access loans straight into borrowers’ accounts, then paid itself back automatically, with a 10% “transaction fee,” after a direct deposit posted or 35 days elapsed, whichever came first. The contract governing the program disclosed the annual percentage rate (APR) as 120% in all cases. Plaintiffs obtained Early Access loans, which were paid back fewer than 30 days later. They contend that the 120% figure is false and misleading. Calculated using a more conventional method, in which the APR is tied to the length of the loan, plaintiffs assert that the APR was actually as high as 3650%. The district court rejected an Ohio law breach-of-contract claim, holding that the contract unambiguously disclosed the method for calculating APR despite admitting that the result “may be misleading.” The Sixth Circuit reversed. The contract was ambiguous because it provided different descriptions of “APR” that cannot be reconciled. The first was a definition, lifted verbatim from a federal regulation, that describes the APR as being “expressed as a yearly rate”; the second was the method used to calculate it, which is not based on any time period. The ambiguity raises a question of fact that should be resolved on remand. View "Laskaris v. Fifth Third Bank" on Justia Law

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A consumer paying by check usually provides identification such as a driver’s license. The merchant often takes the bank account number and the driver’s license number and sends them to companies like TeleCheck. TeleCheck runs these identifiers through its system and may recommend that the merchant refuse the check. When a customer presents two identifiers, TeleCheck records a link between them in its system. If, in a later transaction, a customer uses only one of those identifiers, TeleCheck recommends a decline if there is a debt associated with the presented identifier or the linked identifier. Huff requested a copy of his TeleCheck file (Fair Credit Reporting Act. 15 U.S.C. 1681g(a)(1)), providing only his driver’s license. The report contained only the 23 transactions in which he presented his license during the past year but stated that: “Your record is linked to information not included in this report, subject to identity verification prior to disclosure. Please contact TeleCheck.” Huff did not call. Huff’s driver’s license actually links to six different bank accounts. In addition to omitting the linked accounts, the report did not reveal checks from those accounts that were not presented with Huff’s license. TeleCheck has never told a merchant to decline one of Huff’s checks. Huff filed suit and moved for class certification. The Sixth Circuit affirmed the dismissal of the case because Huff lacked standing for failure to show that the incomplete report injured him in any way. View "Huff v. TeleCheck Services., Inc." on Justia Law

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Pittman's mortgage note requires that Pittman pay $1,980.42 monthly. iServe initially serviced the loan. Pittman failed to make two payments in 2011. iServe granted Pittman a Trial Modification Plan (TPP) under the Home Affordable Mortgage Program. Pittman was to make three $1,357.80 payments in 2012; “[a]fter all trial period payments are timely made ... your mortgage will be permanently modified.” Pittman made the payments but the TPP was never made permanent in writing. Pittman continued to make reduced payments. Servicing of the loan was assigned to BSI, which sent Pittman a notice of default. Pittman’s attorney, Borman discovered that iServe did not report the modification to the Treasury Department. In January 2013, iServe emailed BSI that“[t]he borrower … made all payments on time, contractually entitling him to a permanent mod [sic] in April 2012.” BSI told Pittman to continue the trial payment amount. In 2014, Pittman obtained a credit report, which showed that both servicers had reported his payments as past due. Pittman sent letters to credit reporting agencies disputing the information. The loan servicers concluded that the payments were untimely as reported. In addition, BSI had not made property tax payments from Pittman's escrow account. Pittman sued, alleging negligent and willful violation of the Fair Credit Reporting Act, 15 U.S.C. 1681n, 1681o. The court granted the servicers summary judgment. The Sixth Circuit reversed in part. The reasonableness of the investigations is a question for the trier of fact to resolve. Pittman’s missed payments did not constitute a substantial breach, so Michigan’s first substantial breach rule does not prevent Pittman from bringing a breach of contract claim against BSI. View "Pittman v. Experian Information Solutions, Inc." on Justia Law

Posted in: Banking, Consumer Law

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Plaintiffs each received a letter from GC, a debt collector, notifying them that their credit-card accounts had been referred for collection. The letters contained the name and address of the original creditor and stated: [I]f you do dispute all or any portion of this debt within 30 days of receiving this letter, we will obtain verification of the debt from our client and send it to you. Or, if within 30 days of receiving this letter you request the name and address of the original creditor, we will provide it to you in the event it differs from our client, Synchrony Bank. Plaintiffs assert that the letters were deficient under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692, in failing to inform Plaintiffs that GC was obligated to provide the additional debt and creditor information only if Plaintiffs disputed their debts in writing. Plaintiffs filed a purported class action. The court determined that GC’s letters created a “substantial” risk that consumers would waive important FDCPA protections by following GC’s deficient instructions, and certified a class of Kentucky and Nevada consumers, rejecting GC’s argument that Federal Rule of Civil Procedure 23 was not satisfied because Plaintiffs had not shown that each class member had standing. The Sixth Circuit affirmed, rejecting arguments that that the alleged FDCPA violations did not constitute harm sufficiently concrete to satisfy the injury-in-fact requirement of standing. Plaintiffs have Article III standing. View "Macy v. GC Services Limited Partnership" on Justia Law

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Defendants service student loans. Parchman, individually and on behalf of others similarly situated, filed suit, alleging violations of the Telephone Consumer Protection Act (TCPA), 47 U.S.C. 227, which prohibits a party from making a call “using any automatic telephone dialing system or an artificial or prerecorded voice,” absent an emergency or consent. Plaintiffs alleged that Defendants “negligently, knowingly and/or willfully contact[ed] Plaintiffs on Plaintiffs’ cellular telephones without their prior express consent and repeatedly contacted plaintiff Parchman, even though he never gave them his cell phone number, never owed any debt to any Defendant, and told them to stop calling. Plaintiffs alleged that, although plaintiff Carlin took out a student loan in 2012, Defendants repeatedly contacted her, even after she demanded in writing that they stop calling her, in October 2014. Defendant NSI successfully moved to sever and dismiss Carlin’s claims because the calls involved different companies and their respective calling practices. Plaintiffs unsuccessfully moved to amend the complaint after Parchman died to substitute Parchman’s daughter. Defendants argued that the requisite elements of adequacy of class counsel and adequacy of class representatives were not met. The Sixth Circuit reversed in part, holding that a TCPA claim does survive death, but affirmed with respect to Carlin’s claims. View "Parchman v. SLM Corp." on Justia Law

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Based on allegedly deceptive pictures on pet food packaging, Wysong alleged false advertising under the Lanham Act, requiring proof that the Defendants made false or misleading statements of fact about their products, which actually deceived or had a tendency to deceive a substantial portion of the intended audience, and likely influenced the deceived consumers’ purchasing decisions, 15 U.S.C. 1125(a). The Sixth Circuit affirmed the complaint's dismissal. If a plaintiff shows that the defendant’s advertising communicated a “literally false” message to consumers, courts presume that consumers were actually deceived. Wysong claimed the Defendants’ messaging was literally false because the photographs on their packages tell consumers their kibble is made from premium cuts of meat—when it is actually made from the trimmings. A reasonable consumer could understand the Defendants’ packaging as indicating the type of animal from which the food was made but not the precise cut used so that Wysong’s literal-falsity argument fails. A plaintiff can, alternatively, show that the defendant’s messaging was “misleading,” by proving that a “significant portion” of reasonable consumers were actually deceived by the defendant’s messaging, usually by using consumer surveys. Wysong’s complaints do not support a plausible inference that the Defendants’ packaging caused a significant number of reasonable consumers to believe their pet food was made from premium lamb chops, T-bone steaks, and the like. Reasonable consumers know that marketing involves some level of exaggeration. View "Wysong Corp. v. Wal-Mart Stores, Inc." on Justia Law

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The Hagys took a loan to purchase a mobile home and property on which to park it. In 2010, they defaulted. Green Tree initiated foreclosure. Hagy called Green Tree’s law firm, Demers & Adams, wanting to settling the claim. Demers sent a letter containing a Warranty Deed in Lieu of Foreclosure, stating, “In return for [the Hagys] executing the Deed … Green Tree has advised me that it will waive any deficiency balance.” The Hagys executed the Deed. Demers wrote to the Hagys’ attorney, confirming receipt of the executed Deed and reaffirming that “Green Tree will not attempt to collect any deficiency balance.” Green Tree dismissed the foreclosure complaint but began calling the Hagys to collect the debt that they no longer owed. Green Tree realized its mistake and agreed that the Hagys owed nothing. In 2011, the Hagys sued, citing the Fair Debt Collection Practices Act and the Ohio Consumer Sales Practices Act. Green Tree resolved the dispute through arbitration. The court granted the Hagys summary judgment, reasoning that Demers’ letter “fail[ed] to disclose” that it was “from a debt collector” under 15 U.S.C. 1692e(11). The court awarded them $1,800 in statutory damages and $74,196 in attorney’s fees. The Sixth Circuit dismissed an appeal and the underlying suit. The complaint failed to identify a cognizable injury traceable to Demers; Congress cannot override Article III of the Constitution by labeling the violation of any statutory requirement a cognizable injury. View "Hagy v. Demers & Adams" on Justia Law