October 26, 2014

Tenth Circuit: Judgment Against Individual for Participation in Telemarketing Scheme Affirmed

The Tenth Circuit published its opinion in Federal Trade Commission v. Chapman on Tuesday, May 7, 2013.

This consumer protection action was brought by the Federal Trade Commission and four states against several individual and corporate defendants who marketed and sold to consumers grant-related goods and services with false representations that the consumers were guaranteed or likely to receive grants. After the claims against the other defendants were settled or adjudicated, the district court held a bench trial on the remaining claim against Meggie Chapman. Following the trial, the court found that Ms. Chapman violated the Telemarketing Sales Rule by providing substantial assistance to the telemarketing defendants while knowing or consciously avoiding knowing of their deceptive telemarketing practices. The court ordered a permanent injunction and $1,682,950 in monetary damages against Ms. Chapman. The court also denied Ms. Chapman’s post-judgment motion to alter or amend the judgment or, alternatively, for remittitur. Ms. Chapman appealed.

It is undisputed the Kansas defendants violated § 310.3(a)(2) by misrepresenting material aspects of the grant-related goods or services they sold. Thus, the only disputed issues are (a) whether Ms. Chapman provided substantial assistance to the Kansas defendants and (b) whether Ms. Chapman knew or consciously avoided knowing of their misrepresentations.

Regardless of the standard of review, the Tenth Circuit concluded Ms. Chapman played an integral part in the Kansas defendants’ telemarketing scheme. The Court found no error in the district court’s determination that Ms. Chapman provided substantial assistance to the Kansas defendants. Additionally, the Tenth Circuit concluded that district court’s finding that Ms. Chapman knew or consciously avoided knowing of the Kansas defendants’ misrepresentations was supported by the record and was not clearly erroneous.

Ms. Chapman argued in the alternative that the district court erred in denying her post-judgment motion to alter or amend the judgment or for remittitur. She argued that if she knew or consciously avoided knowing of the Kansas defendants’ misrepresentations, this did not occur until some time during the course of their business relationship, and thus the damages award should not have included the entire amount she billed to the Kansas defendants from the start of their relationship.

In denying the post-judgment motion, the district court first noted that a motion to alter or amend judgment under Rule 59(e) may only be granted under certain limited circumstances, such as when there is a need to correct clear error or prevent manifest injustice. Similarly, remittitur is only appropriate if the award is so excessive that it shocks the judicial conscience and raises an irresistible inference that passion, prejudice, corruption, or other improper cause invaded the trial. The Tenth Circuit was not persuaded the district court abused its discretion by denying Ms. Chapman’s postjudgment motion to reduce the amount of damages. Accordingly, under this deferential standard of review, the Court AFFIRMED the district court’s denial of post-judgment relief.

SB 13-248: Allowing the Attorney General or a District Attorney to Enforce Subpoenas Against Out-of-State Persons for Cases Involving Consumer Protection Violations

On Monday, April 1, 2013, Sen. Irene Aguilar introduced SB 13-248 – Concerning the Authority of the Attorney General or a District Attorney to Enforce Subpoenas for Consumer Protection Violations Against Persons Located Outside Colorado. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

For the purposes of the “Colorado Consumer Protection Act,” the “Refund Anticipation Loans Act,” the “Colorado Rental Purchase Agreement Act,” the “Colorado Fair Debt Collection Practices Act,” and the “Colorado Credit Services Organization Act,” the bill states that the power of the attorney general or a district attorney to issue subpoenas includes the right to issue a subpoena to any person, whether in this state or elsewhere, who has engaged in or is engaging in violations of these acts.

For the purposes of the “Colorado Consumer Protection Act,” if the records of a person who has been issued a subpoena are located outside this state, the person shall either:

  • Make them available to the attorney general or district attorney at a convenient location within this state; or
  • Pay the reasonable and necessary expenses for the attorney general or district attorney, or his or her designee, to examine the records at the place where they are maintained.

The attorney general or district attorney may designate representatives, including comparable officials of the state in which the records are located, to inspect the records on behalf of the attorney general or district attorney. The bill was introduced on April 1 and is assigned to the Judiciary Committee.

Since this summary, the bill was referred, unamended, to the Senate Committee of the Whole for Second Reading.

SB 13-182: Amending Provisions of the Colorado Consumer Protection Act Relating to Time Share Transactions

On Tuesday, February 19, 2013, Sen. Jeanne Nicholson introduced SB 13-182 – Concerning Deceptive Trade Practices Related to Time Share Resale Services. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill amends provisions of the “Colorado Consumer Protection Act” relating to time share transactions and, in particular, transactions involving resale time shares. The bill requires entities that provide time share resale services to disclose specified information about the services to the owner of the resale time share, and makes failure to disclose the information a deceptive trade practice. A time share resale entity is prohibited from knowingly transferring or offering to transfer, or receiving compensation in connection with a transfer of, a resale time share to a transferee who is unable or does not intend to fulfill the obligations of ownership. A person injured by a violation of the requirements relating to time share resale services may bring an action for damages within three years after discovering the violation.

The bill defines specified activities as deceptive trade practices in the advertisement or sale of a time share or the provision of a time share resale service.

The bill defines the following terms: “Resale time share,” “time share resale entity,” “time share resale service,” and “time share resale transfer agreement.” On March 8, the bill passed 2nd Reading in the Senate.

Since this summary, the bill passed the Senate on Third Reading and was introduced in the House. It is assigned to the Business, Labor, Economic, & Workforce Development Committee.

Tenth Circuit: District Court’s Dismissal of Plaintiff’s Claims Against Loan Servicer for Overcharges and Fees Was Proper

The Tenth Circuit published its opinion in Berneike v. Citimortgage on Monday, February 25, 2013.

Over a six-month period in 2010, Adriana Berneike (“Berneike”) faxed more than one hundred letters to Citimortage (“Citi”), claiming that, despite paying in full every bill she received, she continued to be overcharged by Citi and was facing foreclosure and bankruptcy. Citi acknowledged Berneike’s inquiries and responded that it believed her account was correctly serviced.

Berneike filed suit in Utah state court alleging in part that Citi’s conduct violated the Real Estate Settlement Procedures Act (“RESPA”) and the Utah Consumer Sales Practices Act (“UCSPA”). Citi removed the case to federal court, and the court then granted Citi’s motion to dismiss Berneike’s claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Berneike appealed the district court’s dismissal.

RESPA CLAIM

Berneike raised two arguments: first, she argued the district court erroneously considered documents outside of the pleadings to find that Citi had provided notice of its qualified written request (“QWR”) address for these types of complaints; and, second, that Citi waived its right to receive QWRs at the designated address by responding to her first round of faxed letters. It was undisputed that Berneike failed to send her correspondence to the correct QWR address.

Documents Outside the Pleadings.  Berneike claimed the district court erred when it considered Citi’s Welcome Letter, which included notice to Berneike of a designated address for receipt of QWRs. Generally, a court considers only the contents of the complaint when ruling on a 12(b)(6) motion. Gee v. Pacheco, 627 F.3d 1178, 1186 (10th Cir. 2010). Although the Tenth Circuit concluded that the district improperly considered the Welcome Letter, it was not reversible error for the district court to do so because the same notice containing the correct QWR address was also set forth in the monthly billing statements, which were properly before the court.

Waiver.  Berneike next argued that Citi waived its right to receive QWRs at the designated address by corresponding with her. The Tenth Circuit concluded this was the incorrect inquiry. Rather, the correct inquiry was whether the correspondence satisfied the requirements of RESPA such that Citi’s duties thereunder were triggered. Because Congress has not directly addressed the precise question at issue, the Tenth Circuit proceeded to ask whether the agency’s interpretation was a permissible construction of the statute. HUD, the relevant agency, promulgated 24 C.F.R. § 3500.21, which granted servicers like Citi the authority to designate an exclusive address for receipt of QWRs.

The Tenth Circuit held that this grant of authority to servicers to designate an exclusive address was a permissible construction of the statute, since RESPA recognizes that servicers will not have a statutory duty to respond to all inquiries or complaints from borrowers, and that failure to send the QWR to the designated address does not trigger a servicer’s duties. Since receipt at the designated address is necessary to trigger RESPA duties, and it was undisputed that Citi did not receive Berneike’s letters at the designated address, the district court did not err in dismissing Berneike’s RESPA claim.

UCSPA CLAIM

Berneike next contended that the district court erred by dismissing her state consumer protection claim. Specifically, she disagreed with the district court’s conclusion that UCSPA did not apply to mortgage loan transactions and that she was barred from asserting a UCSPA claim because the conduct she complained of is governed by other, more specific law. Since the Utah Supreme Court had not ruled on whether the UCSPA applies to loan servicing, the Tenth Circuit interpreted and applied the law of Utah as the Court believed the Utah Supreme Court would. While the Utah Supreme Court had not explicitly decided whether a borrower can assert a USCPA claim under these circumstances, it has ruled that a USCPA claim is barred when the complained-of conduct is governed by other, more specific law. Because the alleged wrongful conduct is governed by more specific statutes than the UCSPA, Berneike was barred from asserting a USCPA claim.

Dismissal AFFIRMED.

SB 13-018: Specifying Purposes for Which an Employer or Potential Employer May Use Consumer Credit Information

On Wednesday, January 9, 2013, Sen. Jessie Ulibarri introduced SB 13-018 – Concerning the Use of Consumer Credit Information by Employers. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill creates the “Employment Opportunity Act,” which specifies the purposes for which consumer credit information (i.e., consumer credit reports and credit scores) can be used by an employer or potential employer (jointly referred to as “employer”). Specifically, the bill:

  • Prohibits an employer’s use of consumer credit information for employment purposes if the information is unrelated to the job;
  • Requires an employer to disclose to an employee or applicant for employment (jointly referred to as “employee”) when the employer uses the employee’s consumer credit information to take adverse action against him or her and the particular credit information upon which the employer relied;
  • Authorizes an employee aggrieved by a violation of the above provisions to bring suit for an injunction, damages, or both; and
  • Requires the department of labor and employment to enforce the laws related to employer use of consumer credit information.

Assigned to the Business, Labor, and Technology Committee.

Colorado Court of Appeals: When Calculating Lodestar Amount, Court Should Have Applied Percentage Reductions to Total Hours Billed Before Applying Hourly Rate Multiplier

The Colorado Court of Appeals issued its opinion in Payan v. Nash Finch Co. on August 16, 2012.

Colorado Consumer Protection Act—Civil Theft—Fee Award—Lodestar Amount.

Plaintiffs appealed the trial court’s order awarding attorney fees in their favor against defendant Nash Finch Company, doing business as Avanza Supermarket (Nash Finch). The order was affirmed in part and reversed in part, and the case was remanded.

In June 2008, Nash Finch implemented a misleading pricing scheme in two of its Denver metro area supermarkets. Customers were led to believe they would receive an additional 10% savings compared to regular prices, when in fact, the cashier added 10% to the price at checkout. Plaintiffs were customers at these supermarkets who did not immediately realize they had paid more than the advertised price. Plaintiffs ultimately litigated their Colorado Consumer Protection Act (CCPA) and civil theft claims at trial. Three days before trial, Nash Finch filed an admission of liability and confession of judgment for the full amount of the statutory damages sought by plaintiffs, a total of $4,200. The trial court entered an order awarding plaintiffs attorney fees.

Plaintiffs asserted that the trial court’s fee award was in error in numerous respects. First, plaintiffs contended the trial court did not take the proper arithmetical steps in calculating the lodestar amount before it made subsequent adjustments to that amount. The trial court should have applied the percentage reductions to the total hours billed before applying the hourly rate multiplier. Therefore, the court’s calculation of the lodestar amount was in error, and that amount should be recalculated on remand.

Plaintiffs further contended that the trial court abused its discretion and committed legal error in making certain downward adjustments to counsel’s billed hours. A trial court retains discretion to reduce the hours billed based on block billing if the court is unable to determine whether the amount of time spent on various tasks was reasonable. Therefore, the court did not abuse its discretion in making such adjustments to counsel’s billed hours.

Plaintiffs next contended that the trial court abused its discretion by making a reduction for time spent on dismissed claims and the class action complaint. Plaintiffs failed to present any proof as to the number of hours actually spent on the dismissed claims. Therefore, the trial court’s decision was not disturbed on appeal.

Plaintiffs also argued that the trial court erred in making a reduction for lack of complexity. The trial court was in the best position to observe and determine the relative complexity of the issues and arguments presented to it. Therefore, the trial court’s reduction of 5% for lack of complexity was not an abuse of discretion.

Plaintiffs also contended that the trial court erred in determining reasonable hourly rates for plaintiffs’ counsel based on its view of appropriate staffing of the case. The trial court did not abuse its discretion in making such a determination.

Furthermore, the trial court correctly determined that (1) the rule of proportionality could not be applied; (2) the court’s 10% reduction in the lodestar amount for lack of public importance was not an abuse of discretion, because the record supports the conclusion that plaintiffs’ suit was not a factor in inducing Nash Finch to cease its improper conduct; and (3) the court did not abuse its discretion in denying plaintiffs’ motion for discovery of Nash Finch’s billing records, given that both experts were able to produce their reports without the aid of such discovery.

Summary and full case available here.

Consumer Fraud Alert: Fraudulent Medicare Callers Are Robbing Bank Accounts

According to the Denver DA, there has been a rash of phone calls from solicitors claiming to be from the “Senior Medicare Card Office” who are manipulating Medicare beneficiaries into revealing their bank account numbers. Once they have obtained this information, the solicitor then goes on to steal money from the beneficiary’s bank account.

The caller initially explains that the beneficiary will be receiving updated Medicare cards within the “next three to five days,” but first, the beneficiary must verify personal information over the phone, such as name, address, and other information. As a lure to get the banking account number, the caller then reads the root number of the person’s bank (the first series of numbers on a check), then asks the beneficiary to complete the sequence by providing the numbers of their actual banking account. The caller’s tone is particularly authoritative, and if the beneficiary does not readily comply, an alleged “supervisor” is put on the line to exert additional pressure.

Remember that Medicare will never, ever call on the phone or knock at a door. New Medicare cards will only be issued when a beneficiary initiates the request for a lost or stolen card. And, aside from setting up a direct deposit account to receive a Medicare check, Medicare does not need personal bank account numbers. This is only true if the bank account in which the Medicare check is to be deposited has changed, but the change must be initiated by the beneficiary.

 Other tips:

  • Never give out personal or financial information, regardless of who calls.  If in doubt, call the number of a legitimate business using information obtained from a legitimate source – In this case: 1-800-MEDICARE (1-800-633-4223)
  • If you have caller ID, write down the number.
  • Be assertive and hang up the phone! It’s shrewd to be rude.
  • Contact the Senior Medicare Patrol investigators at 1-800-503-5190.  Be sure to document the event.

Denver DA’s Fraud Line: 720-913-9179

Tenth Circuit: Case or Controversy Consistently Found Between Officials Charged with Enforcing Law and Private Parties Potentially Subject to Enforcement

The Tenth Circuit Court of Appeals published its opinion in Consumer Data Industry Assoc. v. King on Monday, May 7, 2012.

The Tenth Circuit vacated the district court’s decision. “New Mexico enacted a law making it easier for victims of identity theft to expunge negative information from their credit reports. Before the law took effect, the Consumer Data Industry Association (“CDIA”), a trade group comprised of hundreds of consumer-data companies, brought a pre-enforcement challenge contending the law is preempted by the federal Fair Credit Reporting Act (“FCRA”). The CDIA sought declaratory and injunctive relief against the New Mexico Attorney General, who, along with aggrieved consumers, has authority to enforce the law through civil suit. Concluding equitable relief against the Attorney General would not adequately redress CDIA’s injuries, the district court dismissed the case as non-justiciable.” Petitioners appeals the district court’s decision.

The Court vacated the district court’s judgment and remanded for further proceedings. “[F]ederal courts have consistently found a case or controversy in suits between state officials charged with enforcing a law and private parties potentially subject to enforcement.” As such, Petitioners have standing to sue for injunctive relief. Also, to satisfy the ‘case or controversy’ requirement, “a request for declaratory relief must settle ‘some dispute which affects the behavior of the defendant toward the plaintiff'; Here,  Petitioners are faced with the imminent threat of the new law’s enforcement and a declaration that the challenged provisions are preempted by federal law would redress the threat of enforcement. Lastly, “ripeness is seldom an obstacle to a pre-enforcement challenge in this posture, where the plaintiff faces a ‘credible threat’ of enforcement, and ‘should not be required to await and undergo [enforcement] as the sole means of seeking relief.'”

SB 12-003: Purposes for which Consumer Credit Information Can Be Used by Employers

On January 11, 2012, Sen. Carroll and Rep. Fischer introduced SB 12-003 – Concerning the use of consumer credit information by employers. This summary is published here courtesy of the Colorado Bar Association’s e-Legislative Report.

The bill creates the “Employment Opportunity Act,” which specifies the purposes for which consumer credit information (i.e., consumer credit reports and credit scores) can be used by an employer or potential employer. Specifically, the bill:

  • Prohibits an employer’s use of consumer credit information for employment purposes if the information is unrelated to the job;
  • Requires an employer to disclose to an employee or applicant for employment (jointly, “employee”) when the employer uses the employee’s consumer credit information to take adverse action against him or her and the particular credit information upon which the employer relied;
  • Authorizes an employee aggrieved by a violation of the above provisions to bring suit for an injunction, damages, or both; and
  • Requires the department of labor and employment to enforce the laws related to employer use of consumer credit information.

Summaries of other featured bills can be found here.

Colorado Supreme Court: Causation and Injury Elements of Consumer Protect Act Claims May Be Inferred from Circumstantial Evidence Common to the Class

The Colorado Supreme Court issued its opinion in Garcia v. Medved Chevrolet, Inc. on October 31, 2011.

Class Actions—Burden of Proof—Circumstantial Evidence—Inference or Presumption—Colorado Consumer Protection Act.

Applying the standards enunciated in Jackson v. Unocal Corp. (Oct. 31, 2011, No. 09SC668), the Supreme Court concluded that the trial court failed to rigorously analyze the evidence in deciding to grant class certification. The Court therefore affirmed the court of appeals’ decision remanding the case to the trial court to conduct such an analysis.

Consistent with its opinion in BP America Production Co. v. Patterson, 185 P. 3d 811 (Colo. 2008),the Court held that the causation and injury elements of plaintiffs’ Consumer Protection Act claims may be inferred from circumstantial evidence common to the class. The Court further held that defendant has the opportunity to rebut such class-wide inferences with individual evidence. The Court concluded that, in its analysis, the trial court neglected to consider the evidence offered by defendant to refute plaintiffs’ class-wide theories of liability.

Summary and full case available here.

Advertising Law in 2011: Attending This Program Could Help Support Your Immune System!*

* Cannot be verified by any credible medical organization.

But that doesn’t mean you won’t see some real benefits from attending this excellent program on September 9, 2011. CBA-CLE is bringing in, just for you, legal professionals from the Federal Trade Commission and the Colorado Attorney General’s Office, nationally known private practitioners, and national business experts who will join together in Denver for this informative workshop about complying with truth-in-advertising laws.

No other program in the state will offer you the in-depth, comprehensive approach that this seminar will with its distinguish faculty of experts!

Topics of the program will include:

  • Priorities from the Colorado Attorney’s General’s Office, Consumer Protection Section
  • Federal Trade Commission Updates from the Bureau of Consumer Protection
  • Substantiating Advertising Claims, including Health Claims and Green Guides
  • The Use of Social Media in Advertising
  • Copyright and Trademark Primer for Non-Intellectual Property Attorneys
  • Competitive Issues, including the Lanham Act and National Advertising Division

Register today and mark your calendars for this great program. We look forward to seeing you there!

CLE Program: Advertising Law in 2011

This CLE presentation will take place on Friday, September 9. Participants may attend live in our classroom or watch the live webcast.

If you can’t make the live program or webcast, the program will also be available as a homestudy in three formats: video on-demand, mp3 download, and audio CD recordings. The course materials will also be available.

Governor Hickenlooper Announces Appointments to the Colorado Commission on Low Income Energy Assistance

Last Friday, June 24, 2011, Governor John Hickenlooper announced his appointments to the Colorado Commission on Low Income Energy Assistance.

The Commission works through the Low Income Energy Assistance Program to collect and distribute money to eligible recipients for use in the payment of electric and gas utility bills. The members appointed are:

  • Jacinda Mari Fonseca-Hughes, of Limon, to serve as an assistance recipient; term to expire December 2, 2012.
  • Douglas Andrew Karl, of Arvada, to serve as the designee for the Governor’s Energy Office; term to expire December 2, 2012.
  • Sister Karen Bland, of Grand Junction, to serve as a public member; term to expire December 2, 2012.
  • Dr. Curtis B. Schmidt, of Littleton, to serve as an assistance recipient; term to expire on December 2, 2012.

The full press release from the Governor’s Office concerning these commission appointments can be found here.