Update I On June 4, 2012, a federal district court found that a plaintiff lacked constitutional standing to bring a claim for alleged violations of the fee-notice requirement under EFTA. In Charvat v. First National Bank of Wahoo (link here), the United States District Court for the District of Nebraska held that the plaintiff lacked standing because he did not allege an injury in fact.1 The court also stayed all proceedings in the case pending the U.S. Supreme Court's decision in First American Financial Corp. v. Edwards, discussed below.
Update II On June 28, 2012, the United States
Supreme Court decided First American Financial Corp. v.
Edwards. Although expected to be an important decision in the
development of standing jurisprudence, First American was
largely a nonevent. The Supreme Court dismissed the case, stating
without any explanation that "[t]he writ of certiorari [had
been] improvidently granted" (link here). The
upshot: for now, lower courts will be left to decide standing
challenges—including those made in litigation under
Electronic Fund Transfer Act (EFTA)—without additional
guidance from the Supreme Court. In addition, the Ninth
Circuit's decision holding that a plaintiff had constitutional
standing to bring a claim under the Real Estate Settlement
Procedures Act (RESPA) remains intact.
Update III On August 2, 2013, the Eighth Circuit
reversed the lower court's ruling in Charvat.
According to the Eighth Circuit:
[W]e conclude Charvat . . . had standing to pursue his [EFTA] claims against Appellees based on the informational injury that he allegedly sustained. The district court concluded that because Charvat failed to allege some injury beyond the failure to receive an "on machine" notice, he had not suffered a cognizable injury in fact. We disagree. Decisions by this Court and the Supreme Court indicate that an informational injury alone is sufficient to confer standing, even without an additional economic or other injury.[34]
Other courts that have rejected standing arguments made by
defendants in EFTA litigation include:
" Alicea v. Citizens Bank of Pennsylvania (W.D.
Pa.)[35]
" Mabary v. Hometown Bank, N.A. (S.D.
Tx.)[36]
" Bell v. First Bank Richmond (S.D.
Ind.)[37]
" Frey v. eGlobal ATM (N.D. Tx.)[38]
" Zabienski v. ONB Bank & Trus (N.D.
Okla.)[39]
" Johnson v. Rustad & Associates, Inc. (D. Minn.)
[40]
* * *
February 23, 2012
Advisory
Introduction In this installment of our
advisory, we discuss the strategy of moving to dismiss a fee-notice
litigation on the grounds that a plaintiff lacks constitutional
standing to bring suit under EFTA. After explaining the standing
doctrine, we argue that a plaintiff who has prior notice of an ATM
fee cannot establish an injury in fact or causation. Next, we
analyze two contrary cases decided under EFTA and propose a
response to them based on controlling precedents. Finally, we look
at First American Financial Corp. v. Edwards, a case
pending before the United States Supreme Court, and recommend that
defendants consider moving in the alternative for a stay of
litigation.
Standing Doctrine Under Article III of the
Constitution, federal courts can hear only disputes that raise an
actual case or controversy between the parties. The purpose of this
requirement is to restrict judicial power "to the traditional
role of Anglo-American courts, which is to redress or prevent
actual or imminently threatened injury to persons caused by private
or official violation of law."2 To have standing, a plaintiff must
demonstrate (1) that he or she suffered a concrete, particularized
"injury in fact"; (2) that the defendant's action
caused the claimed injury; and (3) that the claimed injury would
likely be "redressed by a favorable decision."3 Where any one
of these elements is missing, a federal court lacks subject-matter
jurisdiction and the case must be dismissed.4
No Injury in Fact There is a strong argument that
a plaintiff claiming that a defendant failed to post physical
signage of an ATM fee—even though the fee was
electronically disclosed on the ATM screen—cannot
make the injury-in-fact showing. Because the on-screen notice made
the plaintiff aware of the fee, he or she was not misled or
otherwise harmed by the absence of physical signage. Thus, in those
circumstances, the plaintiff suffered no concrete, particularized
injury in fact.
This argument is supported by cases decided outside of the EFTA
context. For example, in Cargill, Inc. v. United States,
the plaintiffs claimed that, by failing to give notice that an
agency had been reestablished, the defendant violated regulations
promulgated under the Federal Advisory Committee Act.5 According to the
Fifth Circuit, while there may have been "technical violations
of the [regulatory] notice rules," the plaintiffs had actual
notice of the agency's continued operation because the
plaintiffs had been meeting with the agency and its personnel.6 In light
of that actual notice, the Fifth Circuit held that the plaintiffs
suffered no injury in fact and "therefore lack[ed] standing to
assert the claim at hand."7
Another example is Central Arizona Irrigation & Drainage
District v. Lujan,8 which arose out of the Secretary of the
Interior's proposal to amend a water-supply contract to allow
recharge of entitlements to groundwater.9 The plaintiffs
brought suit in the United States District Court for the District
of Arizona claiming that the notice of the proposed amendment
violated the Reclamation Reform Act because the notice did not
identify the recharge provisions.10 According to the court, however, the
plaintiffs had "discussed [the recharge] provisions with the
Department of the Interior on numerous occasions" and
"had complete, actual knowledge about [those]
provisions." Accordingly, despite the alleged statutory
violation, the court held that the plaintiffs suffered no injury in
fact and lacked standing.11
The parallels to fee-notice litigation are plain. For the same
reason that there was no injury in fact in Cargill and Central
Arizona, no injury in fact should be found where a fee-notice
plaintiff had actual knowledge of an ATM fee. Where there was
on-screen notice, any missing physical signage caused no
"invasion of a legally protected interest that is both
concrete and particularized[,] and actual or imminent, not
conjectural or hypothetical."12
No Causation Beyond requiring proof of injury in fact, standing demands a causal connection between the claimed injury and the defendant's actions.13 Where a plaintiff inflicts his or her own injury, the causal chain is thrown into question. As a leading treatise explains, "[t]olerance for self-inflicted injury is not boundless. At some point, standing may be denied because the injury seems solely—or almost solely—attributable to the plaintiff."14 In the ordinary fee-notice case, the core "injury" was self-inflicted. Many plaintiffs hunt for non-conforming ATM signage for the sole purpose of commencing litigation. Moreover, using a modern ATM, a consumer must affirmatively agree to pay an ATM fee by pushing a button or on-screen prompt before the transaction can be completed. That type of voluntary conduct undercuts a plaintiff's claim to have standing.
Contrary EFTA Caselaw Defendants should be aware of two contrary cases decided under EFTA. The plaintiffs in In re: Regions Bank ATM Fee Notice Litigation15 and Kinder v. Dearborn Federal Savings Bank16 alleged that the defendants violated EFTA by failing to provide physical notice of ATM fees. In both cases, the defendants moved to dismiss, arguing plaintiffs lacked standing because the plaintiffs received on-screen notice of the fees. The district courts rejected that argument, holding that the missing physical signage was an EFTA violation, which itself serves as an Article III injury. In a passage followed by Kinder, the Regions court explained:
That Congress included two forms of damages—actual and statutory—is clear evidence that Congress intended to create a statutory right and a mechanism to redress violations [of EFTA]. Regardless of whether Plaintiffs were aware of the ATM fee, they were entitled to notice of the fee in the form prescribed by Congress . . . . Congress created a statutory right to a particular form of notice, and Plaintiffs allege that Defendant did not provide it. That is a concrete, particular injury.17
But the district courts nowhere
recognized (much less analyzed) the following United States Supreme
Court precedents establishing that a statutory
violation—untethered to any harm caused by the challenged
action—cannot create standing:
" Summers v. Earth Island Institute: "[T]he
requirement of injury in fact is a hard floor of Article III
jurisdiction that cannot be removed by statute."18
" Raines v. Byrd: "Congress cannot erase Article
III's standing requirements by statutorily granting the right
to sue to a plaintiff who would not otherwise have standing."19
" Valley Forge Christian College v. Americans United for
Separation of Church & State, Inc.: "Neither the
Administrative Procedure Act, nor any other congressional
enactment, can lower the threshold requirements of standing under
Art. III."20
Thus, despite the holding in Regions and Kinder, an EFTA claim made
in a harm-free vacuum should fall below the "hard floor of Article III jurisdiction."21
First
American In First American Financial Corp. v. Edwards,22
the Supreme Court of the United States is poised to issue a
decision that that will likely crystallize whether cases like
Regions and Kinder can survive scrutiny. The
plaintiff commenced First American alleging that the
defendants engaged in a kickback scheme when they sold her title
insurance, thereby violating RESPA.23
The defendants moved to dismiss, arguing that the plaintiff lacked
Article III standing because she alleged no insurance overcharge or
any other injury in fact. The lower court denied the motion,24 and the Ninth Circuit affirmed.25
Traveling the same path as the Regions and Kinder
courts, the Ninth Circuit reasoned that "[t]he injury required
by Article III can exist solely by
virtue of statutes creating legal rights, the invasion of which
creates standing."26 The court then held: "Because
[RESPA] does not limit liability to instances in which a plaintiff
is overcharged, we hold that Plaintiff has established an injury
sufficient to satisfy Article III."27
The defendants appealed to the United States Supreme Court.28
Briefing was completed on November 10, 2011 (briefs available here), and oral argument was held on November
28, 2011 (transcript available here). No decision has yet been issued.
However First American is decided, the case is likely to
impact litigation under EFTA. Like the typical fee-notice
plaintiff, the plaintiff in First American claims that a
statutory violation alone is sufficient to establish Article III
jurisdiction. That reasoning came under fire during oral argument.
As Chief Justice Roberts remarked:
You said violation of a statute is injury in fact. I would have thought that would be called injury in law. And when we say . . . that what is required is injury in fact, I understand that to be in contradistinction to injury in law. And when you tell me all that you've got . . . is violation of the statute, that doesn't sound like injury in fact.29
Fee-notice defendants will
have reason to cheer if the Ninth Circuit is reversed because it
misconstrued Article III's injury-in-fact requirement. But in
any event, all EFTA litigants will want to pay attention to what
the Court ultimately decides. The case can be tracked here or here.
Stay of Litigation In light of First
American, a fee-notice defendant may want to couple its motion
to dismiss with an alternative request for a stay of the
litigation. This was the approach taken by the defendant in
Mabary v. Hometown Bank,
N.A.,30 a fee-notice case
commenced as a putative class action in the United States District
Court for the Southern District of Texas. After the court certified
a class,31 the defendant moved to dismiss the
case for lack of Article III jurisdiction or, alternatively, to
stay the case pending the outcome of First American.32 The court
issued orders (without a written decision) decertifying the class
and staying the case.33
Conclusion The standing argument could be a
silver-bullet defense, even in the wake of Regions and
Kinder. The key is to persuade courts that, absent actual
injury, a technical EFTA violation cannot establish standing. The
precedents cited above, including Summers and
Cargill, should aid a defendant who makes that argument.
Whether First American will provide defendants with
additional ammunition is something we will soon learn (in all
likelihood, within the next few months).
*
* *
In our next installment of this
advisory, we will discuss offers of judgment in the fee-litigation
context.
1 Charvat v.
First Nat. Bank of Wahoo, 8:12CV97, 2012 WL 2016184 (D. Neb. June
4, 2012).
2 Summers v. Earth Island Inst., 555 U.S. 488,
492 (2009).
3 Lujan
v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)
(internal quotations omitted).
4 See,
e.g., id.; Ford v. NYLCare Health Plans of Gulf Coast, Inc.,
301 F.3d 329, 332 (5th Cir. 2002).
5 173 F.3d
323, 332 (5th Cir. 1999).
6 Id.
7 Id.
8 764 F.
Supp. 582 (D. Ariz. 1991).
9 Id. at 585.
10 Id. at 595.
11 Id.
12 Cargill, 173 F.3d at 329 (internal
quotations omitted) (citing Lujan, 504 U.S. at
560).
13 Lujan,
504 U.S. at 560-61.
14 13A
Charles Alan Wright & Arthur R. Miller, Federal Practice
and Procedure § 3531.5 (3d ed. 1997) (collecting
cases).
15 No.
2:11–MD–2202, 2011 WL 4036691 (S.D. Miss. Sept. 12,
2011).
16 No.
10-12570, 2011 WL 6371184 (E.D. Mich. Dec. 20, 2011).
17 Regions, 2011 WL 6371184, *4 (emphasis in
original).
18 555
U.S. at 497.
19 521
U.S. 811, 820 n.3 (1997).
20 454
U.S. 464, 487 n.24 (1982).
21 Summers, 555 U.S. at 497.
22 No.
10-708, (U.S.) (cert. granted in part by 131 S. Ct.
3022).
23 Edwards v. First Am. Corp., 517 F. Supp. 2d
1199, 1201 (C.D. Cal. 2007).
24 Id. at 1204.
25 610 F.3d 514, 518 (9th Cir.
2010).
26 Id. at 517 (internal
quotations and citations omitted).
27 Id.
28 131 S. Ct. 3022.
29 Tr. of
Oral Argument at 32-33, First Am., No. 10-708
(U.S.).
30 No. 4:10-CV-3936 (S.D. Tex. filed Oct. 19, 2010).
31 2011 WL 5864325 (S.D. Tex. Nov. 22, 2011).
32 No. 4:10-CV-3936 (S.D. Tex.) (ECF No. 43).
33 No. 4:10-CV-3936 (S.D. Tex.), Minute Entry dated Dec. 5, 2011, and Order dated Dec. 21, 2011 (ECF No. 52).
34 No. 12-2790, 2013 WL 3958300, at *3 (8th Cir. Aug. 2, 2013).
35 No. 12-1750, 2013 WL 1891348 (W.D. Pa. May 6, 2013).
36 888 F. Supp. 2d 857 (S.D. Tex. 2012).
37 No. 1:12-CV-00965, 2013 WL 123615 (S.D. Ind. Jan. 7, 2013).
38 No. 3:11-CV-2598-L, 2013 WL 1091237 (N.D. Tex. Mar. 15, 2013).
39 No. 12–CV–0130, 2012 WL 3583020 (N.D. Okla. Aug.20, 2012).
40 No. 2-CV-0926, 2012 WL 5994933 (D. Minn. Nov. 30, 2012).
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