Commercial Banking, Collections, and Bankruptcy

In action alleging that defendant violated Telephone Consumer Protection Act by sending fax to plaintiff, Dist. Ct. did not err in dismissing complaint based upon arbitration clause contained in agreement that plaintiff-chiropractor had signed with third-party, even though defendant had not signed said agreement. Record showed that: (1) plaintiff entered into provider agreement with third-party (which was wholly owned subsidiary of defendant) in order to gain access to defendant’s network of patients, and that provider agreement allowed third-party to assign its obligations to others without approval from plaintiff; (2) once plaintiff had signed agreement, plaintiff submitted over 6,000 patient claims to defendant; and (3) third-party subsequently signed agreement with defendant that required that defendant provide administrative services required in plaintiff’s provider agreement with third-party. As such, Dist. Ct. could properly find that contractual theory of assumption applied, where defendant had assumed material obligations of third-party in provider agreement, such that defendant could enforce arbitration clause in provider agreement. Ct. further noted that plaintiff was aware that defendant was performing said services, and that plaintiff had essentially assented to defendant’s performance of said obligations.

Bankruptcy Ct. did not err in rejecting debtor-employer’s objection to creditors-Welfare, Pension and Annuity Funds’ claims under section 507(a)(5) of Bankruptcy Code for priority status of their claims, where debtor had failed to make required contributions to said Funds prior to filing for Chapter 11 bankruptcy. Section 507(a)(5) allows for said priority up to certain level, and issue in case concerned whether said limitation applied to each Fund that seeks unpaid contributions, or if claims of all three Funds sponsored by instant bankrupt employer must be aggregated into one claim to which limitation cap applied. Text of section 507(a)(5) allowed each Fund to file instant priority claim for services rendered, and record showed that each Fund’s individual priority claim was within section 507(a)(5)(B)’s limitation. As such, each Fund was allowed to claim instant priority under section 507(a)(5).

Record contained sufficient evidence to support liability finding in civil enforcement action under Consumer Financial Protection Act, alleging that defendants-law firms violated Regulation O by telling consumers seeking loan modifications not to communicate with original lenders, failing to make mandatory disclosures and collecting unlawful advance fees with respect to providing mortgage-assistance relief services. Ct. rejected defendants’ contention that they were exempt from liability because they were practicing law, where record showed that defendants typically charged $3,375 per client, which covered only firms’ loan-modification services, and local attorneys associated the defendants: (1) performed only perfunctory review of loan modification applications that had been generated by non-attorneys; and (2) read enrollment script about services and fees. Moreover, in house attorneys in defendants’ law firms did not apply legal principles and/or judgment to particular set of facts so as to qualify for exemption. However, Dist. Ct. erred in imposing $21,709,021 restitution order, since said order exceeded defendants’ net profits. Also, Dist. Ct. erred in calculating civil penalties ranging from $11,350,000 to $3,121,500 against defendants and their attorneys, since said penalties were based on erroneous finding that attorneys had acted recklessly.

Record contained sufficient evidence to support jury’s verdict in favor of defendant-manufacturer of recreational vehicle (R.V.) purchased by plaintiff in action alleging that defendant had breached warranty that required that defendant repair defects in R.V. Record showed that: (1) defendant had reported over 40 significant defects, and that retail dealer of said R.V. serviced R.V. seven times over two-year period; (2) plaintiff sent letter to defendant demanding that defendant buy back instant $160,000 R.V. or exchange it for properly working replacement model; and (3) defendant offered to pay plaintiff to transport R.V. to defendant to make additional repairs, but plaintiff ultimately refused said offer and filed instant lawsuit. While plaintiff argued that Dist. Ct. gave jury instruction that improperly required that he show literal compliance with terms of warranty, any error in giving said instruction was harmless, since plaintiff had failed to give defendant opportunity to cure any defects. Ct. further noted that had plaintiff allowed defendant to fix defects in R.V. and defendant had failed to cure defects, plaintiff would have been entitled to pursue his breach of warranty claim.

District Courts in instant consolidated appeals did not err in either dismissing or granting judgment in favor of defendants-consumer reporting agencies in actions under Fair Credit Reporting Act (FCRA), alleging that defendants did not thoroughly investigate plaintiffs’ claims that creditors, who had demanded payments from plaintiffs, did not actually own right to collect on plaintiffs’ debts. Record showed that plaintiffs had previously asked defendants to reinvestigate accuracy of their credit reports to determine if purported creditors owned right to collect on plaintiffs’ debt. After all creditors had confirmed with defendants that credit reports were accurate without creditors producing proof of original sale or assignment agreement, plaintiffs filed instant actions under FCRA and alleged that defendants failed to fully investigate their claims that defendants did not own right to collect on their debts. Ct. of Appeals, though, found that plaintiffs’ claims were outside contours of FCRA, since: (1) plaintiffs asked defendants to make primarily legal determinations with respect to ownership of right to collect on plaintiffs’ debts; and (2) defendants were only responsible under FCRA for making investigations into alleged factual inaccuracies in plaintiffs’ credit reports.