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Posts Tagged ‘#Ninth Circuit’

The Standing Requirement Remains an Open Question But Still a Valid Defense to Cyber Claims

Posted on: June 26th, 2019

By: Jeff Alitz

In litigation proceeding in the Federal Courts, it has always been necessary for a successful plaintiff to in some manner establish that the harm sought to be remedied by a federal lawsuit falls within the authority of the courts to hear and decide such cases. Put another way, Article III of the Constitution limits the authority of Federal Courts to decide only those cases where the claimant has “standing” –  a cognizable interest in the dispute. That interest must be demonstrated by a showing of  1. A concrete injury, 2. The injury is attributable to the defendant’s actions and 3. The injury can in some way be addressed by a favorable decision in the case. Given the fact that in many cases claimants have demonstrated that a cyber breach has occurred for which a target defendant is responsible, only to be denied standing -and hence denied recovery- where no actual “harm” or loss has been established, just what constitutes that harm is an often-litigated issue that has been in many lawsuits a powerful defense to those parties alleged to have committed some type of cyber misstep. Several recent Supreme Court actions have both done little to clarify that issue – what type of “harm’ must be demonstrated for standing to be proven – but the actions have simultaneously served to preserve standing as a significant hurdle for cyber claim plaintiffs to clear in most states.

Specifically, on March 20, 2019, in reviewing the Frank v. Gaos decision decided by the Ninth Circuit which had approved the class action settlement between Google and a group (class) of Google users, the Supreme Court ordered the Ninth Circuit court to determine if the plaintiffs in that case had suffered a concrete injury before any settlement could be approved. But, in reaching that result, the Court did not give any guidance on how a court need decide if an injury- in- fact had occurred. Less than a week later, in denying certiorari to the parties in Zappos v. Stevens, the Court similarly declined to give any clarity to the injury in fact standard. In effect by refusing to resolve the split among the circuit courts where some have determined that simply identifying theft of information or cyber fraud and the THREAT of future misuse is sufficient to confer standing ( as the Sixth, Seventh, Ninth and D.C. Circuits have done) while others (the First, Second, Third, Fourth and Eighth Circuits) have held that simply alleging the threat of future harm is not enough to establish an actual harm sufficient for standing purposes, the Court has left that issue to the lower courts to continue to resolve on a piecemeal basis.

The Supreme Court’s inaction comes at a time when state legislatures are focusing on the injury -in- fact issue by enacting statutes that attempt to eliminate any requirement that a claimant must establish actual harm to succeed on cyber liability based lawsuit. California’s Privacy Act of 2018, Massachusetts Senate Bill 120 and the Illinois Biometric Privacy Act each either clearly state or simply suggest (in the case of the Illinois act)  that no injury apart from being subject to a theft or disclosure is needed to establish standing. Nevertheless, in those states that have NOT passed such legislation and in those states that are not within the jurisdictions of the Circuit Courts that have watered down the Article III requirement that a concrete injury be established to confer standing, defendants in cyber lawsuits – and their insurers and attorneys – can continue to focus on the lack of provable harm to defeat such claims.

If you have questions or would like more information, please contact Jeff Alitz at [email protected].

Ninth Circuit: Creditors May Be Vicariously Liable for TCPA Violations Based on Common Law Ratification Principles

Posted on: April 16th, 2019

By: Nikki Sachdeva

In a recent opinion, the U.S. Court of Appeals for the Ninth Circuit reversed a district court’s grant of summary judgment in favor of a creditor, finding that common law principles of ratification may create vicarious liability under the Telephone Consumer Protection Act (TCPA). In Henderson v. United Student Aid Funds, 2019 U.S. App. LEXIS 8597 (9th Cir. Mar. 22, 2019), the Court heard an appeal by named plaintiff Henderson in a putative class action brought under the TCPA. After ceasing to make payments on her student loan, Henderson began receiving calls from several debt collection companies. Henderson alleged that the pattern of the calls, which included several prerecorded messages to a cellular telephone number she had not provided in connection with her loan application or consented to be called on, evidenced the use of a combination of skip-tracing and autodialing. Such combined use is prohibited by the TCPA.  47 U.S.C. § 227(b)(1)(A)(iii).

United Student Aid Funds (“USA Funds”), which owned Henderson’s loans, had hired a loan servicer, which in turn hired debt collectors to collect on the unpaid loans. USA Funds did not have contractual relationships with the debt collectors, nor did it have day-to-day interactions with them. However, USA Funds had access to the debt collectors’ performance reports and had previously reviewed the debt collectors’ call notes upon identification of an issue with improper calling practices. As to the loan servicer, USA Funds monitored its regulatory compliance and, while it did not have the ability to fire debt collectors, USA Funds had the ability to ask the loan servicer to replace debt collectors.

In 2017, the U.S. District Court for the Southern District of California granted summary judgment in favor of USA Funds. The district court rejected Henderson’s arguments that there was a triable issue of fact as to whether USA Funds could be liable under theories of classical agency or implied actual authority. Further, finding that there was no principal-agent relationship between USA Funds and the debt collectors, the district court held that USA Funds could not be vicariously liable under a ratification theory.

The Ninth Circuit, in a 2-1 decision, reversed the district court’s grant of summary judgment and remanded for further proceedings. The Court held that there was a material issue of fact as to whether USA Funds ratified the debt collectors’ calling practices. According to the Court’s opinion, federal common law principles of ratification may create vicarious liability under the TCPA even where the contractual agreements at issue state and/or suggest an independent contractor relationship rather than an agency relationship. First, the Court held that ratification may create an agency relationship where none existed before where the acts are “done by an actor… who is not an agent but pretends to be.” The Court noted that the debt collectors told borrowers they were calling on behalf of USA Funds and accepted payments on USA Funds’ behalf. Finding that there was a triable issue of fact, the Court continued: “a reasonable jury could conclude that USA Funds accepted the benefits—loan payments—of the collectors’ calls while knowing some of the calls may have violated the TCPA. If a jury concluded that USA Funds also had ‘knowledge of material facts,’ USA Funds’ acceptance of the benefits of the collector’s unlawful practices would constitute ratification.”

The Ninth Circuit’s decision in Henderson raises issues for creditors and other businesses who engage third parties to conduct borrower or consumer calls on their behalf. Businesses should be mindful that they may be exposed to vicarious liability under the TCPA based on improper conduct by third parties even where there is no contractual relationship with the entity making the allegedly violative telephone calls.

If you have any questions or would like more information, please contact Nikki Sachdeva at [email protected].

Split in the Circuits May Force SCOTUS to Revisit Kingsley

Posted on: March 14th, 2019

By: Ali Sabzevari 

In Kingsley v. Hendrickson, 135 S. Ct. 2466 (2015), the Supreme Court held that a pretrial detainee may prevail on a § 1983 excessive force claim if he or she shows that the force used was objectively unreasonable, regardless of whether the officer had a subjective intent to cause the detainee harm. In reaching this decision, the Court granted more protection to pretrial detainees under the Fourteenth Amendment’s Due Process Clause than is given to convicted prisoners under the Eighth Amendment, which still requires proof of a subjective intent to cause harm before there is a constitutional violation. This make sense because a pretrial detainee is innocent until proven guilty, and so the detainee cannot be subjected to any form of punishment. On the other hand, it is well-settled that a convicted prisoner may be punished so long as the punishment is not “cruel and unusual” under the Eighth Amendment.

Recently, we have seen an uptick in cases whereby pretrial detainees are contending that the holding in Kingsley applies to any and all § 1983 claims, not just those founded on allegations of excessive force. But this is not the holding in Kingsley. Nevertheless, the Ninth Circuit in Castro v. County of Los Angeles, 833 F.3d 1060 (9th Cir. 2016) applied such an interpretation, opening the door for this creative argument. Other circuits, such as the Eleventh Circuit, have denied such an extension despite recent opportunities to do so. Johnson v. Bessemer, 741 F. App’x 694, 699 n.5 (11th Cir. 2018).

The fact remains that the Supreme Court has not ruled on whether to extend this objective reasonableness standard of review to cases of pretrial detainees which do not involve the use of excessive force, e.g., cases challenging medical treatment or conditions of confinement. The current circuit split could mean that the issue might be back in front of the Supreme Court at any time.

If you have any questions or would like more information, please contact Ali Sabzevari at [email protected].

 

The Supreme Court Sets Groundwater Pollution in its Sights

Posted on: February 20th, 2019

By: Ze’eva Kushner

Yesterday, the United States Supreme Court decided to hear an appeal from the Ninth Circuit’s decision in Hawai’i Wildlife Fund et al. v. County of Maui, 886 F.3d 737 (9th Cir. 2018). The Supreme Court will be hearing this case in the Fall to resolve a circuit split regarding whether discharging pollution that travels underground before emerging into an ocean, river or other major waterway requires a permit under the Clean Water Act.

Congress passed the Clean Water Act in 1972. The goal of the Clean Water Act is “to restore and maintain the chemical, physical, and biological integrity of the Nation’s waters.” 33 U.S.C. § 1251(a). One of the primary provisions of the statute makes it unlawful for anyone to discharge a pollutant, meaning adding pollution, to the waters of the United States, including the territorial seas. 33 U.S.C. §§ 1362(12), (7).

The provisions of the Clean Water Act have been interpreted by a number of courts over the years, with the coverage of groundwater pollution being a thorny issue for some time. In February 2018, the Ninth Circuit held that Maui County had to comply with the permitting requirement of the Clean Water Act in order to continue to dispose treated water through underground wells after it was shown that the treated water made its way into the Pacific Ocean through fissures in the ocean floor.

The Fourth Circuit made a similar finding a few months later in a case involving a gasoline pipeline spill in South Carolina when it determined that the Clean Water Act covered claims that the spill contaminated nearby creeks and wetlands after traveling through groundwater.

However, in September 2018, the Sixth Circuit changed direction when it ruled on two cases involving the pollutants released by coal ash ponds, holding that the Clean Water Act cannot be used to regulate pollution that travels through groundwater before reaching navigable waters such as a river or ocean.

Thus, it is up to the Supreme Court to resolve the debate regarding how direct of a connection there must be between a source of pollution and the waters that get polluted. Whether a pollutant that goes underground before making its way into a major waterway is subject to the Clean Water Act will have a major impact on industries across the country.

If you have any questions or would like more information, please contact Ze’eva Kushner at [email protected].

Ninth Circuit Tightens FCRA Disclosure Requirements

Posted on: February 12th, 2019

By: Matthew Foree

Ninth Circuit Holds Combining State and Federal Disclosures Violates FCRA’s Standalone and Clarity Requirements

The Court of Appeals for the Ninth Circuit recently issued a decision regarding the disclosure requirements under the Fair Credit Reporting Act (“FCRA”).  The FCRA includes certain requirements for employers prior to obtaining a consumer report on a job applicant. For example, employers must provide the applicant a “clear and conspicuous disclosure” that they may obtain such a report “in a document that consists solely of the disclosure.”

The Ninth Circuit took the FCRA’s language literally, prohibiting the employer from including any superfluous information in the disclosure document.  The case at issue, Gilberg v. California Check Cashing Stores, LLC, involved a class action filed by Desiree Gilberg, a former employee of CheckSmart Financial, LLC (“CheckSmart”). Before she began working with CheckSmart, Gilbert signed a disclosure regarding background information, which provided that CheckSmart could obtain her background report and that she had the right to request a copy of the report. The form also included information regarding her right to obtain a copy of the report under various state laws. Gilberg alleged that the disclosure violated the FCRA and California’s state law disclosure statute. The Ninth Circuit agreed and reversed the District Court’s grant of summary judgment to CheckSmart.

The Ninth Circuit interpreted the statute literally by holding that providing other state disclosure information in the disclosure form violated the FCRA’s stand-alone document requirement. The Court held that such “extraneous information is as likely to confuse as it is to inform” and, therefore, does not further the FCRA’s purpose.

The court also held that the disclosure, although conspicuous, was not clear. The court focused on the following language of the disclosure at issue:

The scope of this notice and authorization is all-encompassing; however, allowing CheckSmart financial, LLC to obtain from any outside organization all manner of consumer reports and investigative consumer reports now and, if you are hired, throughout the course of your employment to the extent permitted by law.

Among other things, the court recognized the lack of clarity in the first part of the sentence and the typographical error in the second part of the sentence, which lacked a subject and was incomplete. Therefore, it determined that this provision contained “language that a reasonable person would not understand.” The court also held that the disclosure would confuse a reasonable reader because it combined federal and state disclosures.

According to the Gilberg decision, employers in the Ninth Circuit cannot include disclosures required by other state laws in the same document that contains the FCRA disclosure. The obvious result of the decision will be the increase in documentation driven by separate disclosure statements. Although it is unclear whether other courts will adopt the Ninth Circuit’s holdings, employers would do well to revisit their forms to ensure compliance. Given the court’s position that language that would confuse a “reasonable person” would violate the clear and conspicuous requirement, employers should also ensure that their disclosures are clear.

If you have any questions or would like more information, please contact Matthew Foree at (770) 818-4245 or [email protected].