Commercial Banking, Collections, and Bankruptcy

Dist. Ct. did not err in dismissing for failure to state viable claim for relief plaintiff’s action under sections 1692b(2) and 1692f of FDCPA, where plaintiff alleged that defendant telephoned him about alleged debt of his mother, under circumstances where defendant’s representative discussed said debt without asking plaintiff how to reach his mother. Plaintiff lacked standing to sue for violation of section 1692b(2), which prohibits debt collectors from disclosing consumer’s debt to third parties, since said section protects only person whose debt was disclosed. Moreover, while plaintiff could sue defendant under section 1692f, which prohibits debt collectors from using unfair or unconscionable collection practices, instant allegations were insufficient to state viable claim where allegations were too tepid to constitute unfair collection practice, especially where defendant did not request that plaintiff pay instant debt or otherwise threaten plaintiff.

Dist. Ct. erred in decertifying class action alleging violation of Electronics Funds Transfer Act, where defendant-owner of two ATMs allegedly failed to post sticker on machine to alert user of existence of $3 fee to use ATM. While damages in instant class action would total only $10,000, such that class members would only receive $3.57 per ATM transaction if class action were successful, instant small remedy was not sufficient reason to decertify class, even though individual class members could receive at least $100 statutory damages per transaction if allowed to proceed against defendant individually. Moreover, class representative’s service of potential class members via publication in local newspaper and website was sufficient to satisfy notice provisions set forth in Rule 23(c)(2)(B).

Bankruptcy Judge did not err in granting motion for summary judgment by defendants-investors of debtor, even though plaintiff-Trustee asserted that debtor’s payments to defendants, who redeemed shares in Fund operated by debtor, constituted either preferential payment under 11 USC section 547 or fraudulent conveyance under 11 USC section 544. Under section 546(e) of Bankruptcy Code, trustee may not avoid settlement payment or transfer made to financial participant in connection with securities contract, and plaintiff conceded that defendants qualified as “financial participants” when redeeming shares of instant Fund. Ct. further noted that trustee did not invoke exception to prohibition contained in section 546(e), i.e., payments made with actual intent to defraud any entity to which debtor became indebted, even though record suggested that instant Fund eventually played role in Ponzi scheme.

Dist. Ct. erred in rejecting Bankruptcy Trustee’s claims against creditor in Chapter 11 adversary proceeding that essentially sought to set aside creditor’s lien with respect to $312 million in loans made by creditor to debtor, where debtor improperly pledged its customer’s segregated accounts as collateral for said loans in effort to cover debtor’s in-house trading activities, and where Trustee argued that creditor was aware of debtor’s fraudulent activities, and yet loaned money to debtor anyway. While Dist. Ct. believed that debtor’s pledge of segregated funds did not constitute fraudulent transfer since debtor did not “intend” to deprive customers of their funds at time of pledge, Ct. of Appeals found that such pledge demonstrated actual intent to hinder, delay or defraud debtor’s customers sufficient to set aside instant lien since said pledge exposed customers to substantial risk of loss of which they were unaware, and since debtor was aware that said pledge of segregated funds violated Commodity Exchange Act. Moreover, Dist. Ct. improperly dismissed Trustee’s equitable subordination claim regarding creditor’s lien where record contained some evidence that creditor was aware that debtor was engaging in wrongful conduct prior to making instant loans. Thus, remand was required for hearing as to extent of creditor’s knowledge of debtor’s wrongful conduct.

Dist. Ct. did not err in denying plaintiff-class representative’s motion to remand class action back to state court, where defendant had removed plaintiffs’ breach of contract claim to federal court pursuant to Class Action Fairness Act (CAFA), and where plaintiff alleged that said removal took place beyond applicable 30-day period for doing so. Record showed that said removal came within 30 days after plaintiff’s response to defendant’s request for admission of facts as to plaintiff’s theory of damages, and that said response was first time that defendant had actual notice that plaintiff’s theory of damages could generate monetary award that exceeded $5 million threshold for removing cases to federal court under CAFA.

Dist. Ct. did not err in certifying for class action treatment plaintiffs’ claims that defendant’s washing machine contained defect that caused washing machine to suddenly stop. Plaintiff’s proposed class satisfied recent U.S. Supreme Ct. decision in Comcast, 133 S.Ct. 1426, since damages alleged by class members stemmed from same defect in washing machine’s control unit. Fact that damages were not identical for each class member did not preclude class action treatment. Dist. Ct. erred, though, in failing to certify proposed class action concerning defendant’s washing machines that, according to plaintiffs, caused mold to form within said machines since: (1) issue regarding whether mold actually formed in various designs of defendant’s washing machines was common throughout proposed class members; and (2) class members’ damages could be attributed to defendant’s acts that were at issue in instant lawsuit.