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Archive for the ‘Business Litigation’ Category

Georgia’s 8 Year Statute of Limitations for Tort Victims of Unidentified Criminals

Posted on: March 17th, 2017

Image result for generic timelinesBy: Jason Kamp

The longevity of certain crime-related tort claims seemingly increased four-fold.

Georgia tort claims are typically extinguished by the statute of limitations after two years, unless the limitations period is tolled.  One source of tolling is O.C.G.A. § 9-3-99.  It tolls the limitations period for tort claims brought by victims of crime for up to six years.  The Court of Appeals of Georgia revisited the statute’s function in Harrison v. McAfee et al., 338 Ga. App. 393 (2016).  In trying to fix one part of the statute, it appears the court inadvertently broke another.

The July 2016 Harrison case is most noteworthy for its holding, which broadened the tolling statute’s application to tort claims against parties who did not commit the crime in question.  The court held that a bar patron shot during an armed robbery could now toll the statute of limitations even for his claims against the bar.  While the holding’s impact was dramatic and wide reaching, so too is the implication of an overlooked fact of the case—the shooter had not been identified, arrested, or prosecuted.

Under the facts of Harrison, the existence of an actual criminal prosecution is no longer a necessary element for tolling under O.C.G.A. § 9-3-99.  With the limiting language “until the prosecution of such crime or act has become final” plainly written in the statute, it is hard to imagine this is what the textualist Harrison court intended to do. Now, claims arising out of unprosecuted crimes last longer than prosecuted ones.  Either way, the de facto result is that victims of unidentified criminals now have eight years to bring tort claims against non-criminal defendants.  Six years from the tolling statute, plus the regular two.   Allowing non-criminal defendants to get dragged into personal injury lawsuits 8 years after the fact is burdensome enough where there is an identified, prosecuted criminal to apportion fault.  Allowing it where the criminal was never identified is even worse.

For more information, contact Jason Kamp at [email protected].

Eleventh Circuit Applies Spokeo’s Stringent Article III Standing Requirements

Posted on: October 27th, 2016





By: Robyn Flegal

Earlier this year, the Supreme Court clarified the pleading requirements to establish standing in federal lawsuits arising out of alleged statutory violations. A detailed explanation of the Supreme Court’s Spokeo[1] opinion can be found on the FMGBlogLine. As we observed, “the specific line drawing as to what a plaintiff must allege to establish standing ultimately will be determined by the lower courts.” Recently, the Eleventh Circuit sharpened its pencil on this issue.

In Nicknaw v. CitiMortgage, Inc.,[2] the Eleventh Circuit considered whether Nicknaw had standing to bring suit in federal court. Nicknaw alleged that CitiMortgage violated a New York statute when it failed to timely record a certificate of discharge proving he satisfied his mortgage. Relying upon the Spokeo decision, the Eleventh Circuit dismissed Nicknaw’s appeal for lack of jurisdiction because he failed to allege a sufficient “injury in fact.” The Court explained that an injury in fact, which can include intangible harm, requires “an invasion of a legally protected interest that is concrete, particularized, and actual or imminent.”

Applying this standard, the Eleventh Circuit held that the intangible harm caused by CitiMortgate’s recording delay was insufficient to establish standing because Nicknaw failed to allege (1) that he lost money because of CitiMortgage’s failure to timely record, or (2) that he or anyone else was even aware that the certificate of discharge was not recorded during the relevant time. Furthermore, no material risk of harm existed, as Nicknaw filed his suit two years after CitiMortgage recorded the certificate. The Court noted that while Nicknaw failed to allege a concrete and particularized injury as required under Article III, his failure “does not mean that New York law does not create a right that, when violated, could form the basis of a cause of action in a court of New York.”

In conclusion, plaintiffs alleging a technical statutory violation now face a heightened standard to establish standing in federal court. Plaintiffs pursuing claims based upon violations of state statutes may be more inclined to pursue their claims in the state court system to avoid these stringent standing requirements of Article III.

[1] Spokeo v. Robins, 136 S. Ct. 1540 (2016).

[2] Nicknaw v. CitiMortgage, Inc., No. 2:15-CV-14125-JEM,  — F.3d — (October 5, 2016).

CFPB’s Unilateral Power Structure Held Unconstitutional

Posted on: October 24th, 2016

freelancer-financesBy: Kristian N. Smith

After more than five years of heavy regulation and enforcement targeting financial institutions and the automotive industry, the Consumer Financial Protection Bureau (CFPB) faces a new hurdle. Last week, the D.C. Circuit Court of Appeals ruled that the structure of the CFPB is unconstitutional.

The court emphasized the lack of oversight over the CFPB’s judgments and the “unilateral power” given to the agency’s director, explaining that, other than the President, the Director is the “single most powerful official in the entire United States Government, at least when measured in terms of unilateral power.”

The CFPB — created in the wake of the financial crisis by the Dodd-Frank Act as a consumer watchdog — has the ability to “administer, enforce, and otherwise implement federal consumer financial laws, which includes the power to make rules, issue orders, and issue guidance.”

Although the Director is appointed by the President and confirmed by the Senate, neither the Director nor the CFPB are subject to direct oversight from any of the branches of government, and the Director can only be removed for cause.

The D.C. Circuit’s ruling changes this structure.  Now, the CFPB will be given presidential oversight, with the sitting president able to supervise, fire, and direct the head of the CFPB.

Many groups who have been against the CFPB’s existence since its creation welcome this ruling, including those in the financial industry.  Other groups, including those involved with financial reform and consumer banking, have denounced the ruling, calling it a loss for consumers, the very group the CFPB was created to protect.

To date, the CFPB has realized more than $11.7 billion in “relief,” meaning penalties and other items such as forgiven debt balances, passing the benefits on to more than 27 million consumers. The ruling could, however, weaken the CFPB’s effectiveness and its ability to pursue certain cases and retroactively apply new rules.

The ruling could also have wider-reaching implications.  For example, other agencies whose structures are similar to the CFPB’s — including the Office of the Comptroller of the Currency and the Federal Housing Finance Agency — could face similar changes to their power and authority.

The D.C Circuit’s decision will not likely go unchallenged.  A CFPB spokeswoman said that the agency is “considering options for seeking further review of the Court’s decision.” In addition, we will likely see litigation over whether the CFPB’s past rulings, which, according to the D.C. Circuit, took place under an unconstitutional structure, will remain binding.

District Court Dismisses Suit for Failure to Meet the Pleadings Requirements Under the U.S. Telephone Consumer Protection Act

Posted on: October 3rd, 2016

Headset on a laptop computer keyboardBy: A. Ali Sabzevari

A federal judge recently dismissed a class action lawsuit accusing CrossCountry Mortgage, Inc. of contacting consumers nationwide with unsolicited calls, finding that plaintiffs did not clearly show the mortgage lender made the calls in dispute. Filed in May, the lawsuit alleged that CrossCountry contracted with Direct Source to conduct a telemarketing campaign to promote CrossCountry’s mortgages. The lawsuit alleged the defendants’ “overzealous marketing” included repeated, auto-dialed or “robo” calls to consumers’ cellphones without their consent.  The Judge dismissed claims that CrossCountry violated the U.S. Telephone Consumer Protection Act, 47 U.S.C.§ 227 et seq. (“TCPA”).

Passed in 1991 to limit nuisance phone calls, the TCPA bars automatically dialed calls to cell phones without permission.  Companies are not generally liable under the TCPA for calls made on their behalf by third-party telemarketers, but they can be liable if the telemarketer acted as their agent. Under FCC rules, a telemarketer may be an agent if it received a script from the company to use on calls or proprietary information about the company’s products or customers.

To state claim under 42 U.S.C. § 227(b), a complaint must allege that a defendant (1) made any call, (2) using any automatic telephone dialing system, (3) to any telephone number assigned to a pager service or cellular telephone service, (4) absent the prior express consent of the recipient.  To state a claim under § 227(c), moreover, a plaintiff must allege (1) receipt of more than one telephone call within any 12-month period (2) by or on behalf of the same entity (3) in violation of the regulations promulgated by the FCC.

The district court found that plaintiffs failed to allege that CrossCountry physically made or initiated the disputed calls or that Direct Source was acting as CrossCountry’s agent when it made calls.  Attorneys should be cognizant of the federal pleading requirements, especially in cases involving the TCPA, where a failure to plead with specificity could result in a quick dismissal of the lawsuit.

The case is Seri v. CrossCountry Mortgage, Inc. et al., U.S. District Court, Northern District of Ohio, Case No. 16-cv-01214-DAP (Sept. 28, 2016).

No Proof of Damages Knocks-Out Negligent Misrepresentation Claim

Posted on: September 13th, 2016

option 1By: John Goselin and Kristian Smith

There is no point in prosecuting a lawsuit if you can’t prove up any damages. If you don’t think strategically at the beginning, you may find yourself with a pyrrhic victory or just simply a bad taste in your mouth. The Georgia Court of Appeals recently provided some guidance regarding the issue of provable damages in the context of a negligent misrepresentation claim.

A franchisor was held not liable for alleged negligent misrepresentation because the franchisee could not prove any direct or consequential damages. Legacy Academy, Inc. v. Doles-Smith Enterprises, Inc., 2016WL 3208751 (June 9, 2016). This particular lawsuit arose from a lawsuit by Doles-Smith Enterprises (“DSE”), the franchisee, against Legacy Academy, the franchisor, alleging negligent misrepresentation. The Plaintiff strategically chose not to pursue a claim for rescission (which may have cost them the victory here). Legacy asserted counterclaims against DSE, for lost royalties, lost advertising fees, and attorney’s fees.

DSE purchased a Legacy day-care franchise in 2006 after reviewing Legacy’s Franchise Offering Circular. DSE paid a franchise fee and agreed to pay Legacy royalty and advertising fees. DSE’s daycare opened in 2008 and after three years of net losses, DSE stopped paying Legacy monthly royalty and advertising fees. In 2012, DSE learned of problems between Legacy and other franchisees and sent a letter to Legacy terminating their franchise relationship based on alleged false and misleading information in the Offering Circular. They stopped marketing their Legacy affiliation and continued operating the daycare under a different name.

DSE sued alleging negligent misrepresentation and negligence, among other things. The jury found for DSE on these claims and awarded damages. The Georgia Court of Appeals, however, took the victory away from DSE. On appeal, the Court held that the trial court erred in denying Legacy’s motion for directed verdict and j.n.o.v. on the negligent misrepresentation claim because DSE failed to prove any actual economic damages, an essential element of the claim.
Using Georgia’s out-of-pocket standard of recovery for claims of this nature, the Court of Appeals held that DSE had not shown sufficient proof of any actual or consequential damages. Just to make things easier to figure out what constitutes “consequential damages,” the Court of Appeals adopted the Black Law Dictionary definition of consequential damages as governing Georgia law. This new standard remains vague, but helps illustrate why time spent thinking through your damages may be amongst the most important time spent thinking about the case.
First, the Court held that DSE’s franchise fee and DSE’s personal financial costs of funding the purchase of the daycare center were not consequential damages because they were expenditures “inherent in the underlying transaction rather than additional, indirect expenditures incurred as a consequence of the alleged misrepresentations.” The court found that awarding damages in the amount of these types of expenditures would essentially amount to restoring the parties to their original status, which is the goal of rescission, not an award of consequential damages. Since DSE dropped an original claim for rescission, DSE could not claim rescission damages under the guise of consequential damages to obtain a rescission remedy.

Unfortunately, DSE did not develop any specific evidence of consequential damages. The Court of Appeals held that testimony from an owner of DSE about “depletion of personal savings” without specific amounts was too vague to allow the jury to calculate damages without speculation and guesswork. Moreover, the Court found that DSE’s claims that they had to purchase an extra bus and were required to have an owner work on site were contradicted by contractual provisions in the franchise agreement, and the agreement’s “entire agreement/merger” clause barred them from relying on any other verbal or written representations outside of the four corners of the agreement.

The lesson for the day? Don’t forget about the damage component of your claim, what you intend to prove and how you intend to prove it. Otherwise, you may put yourself through a whole lot of litigation effort, but end up empty handed at the end.