Bernstein Shur Business and Commercial Litigation Newsletter #71
March 2017 | Issue 71
Our March recap highlights recent cases addressed to class actions involving Wells Fargo, Subway, and Google, a raid by prosecutors of VW’s American law firm in Munich, and other news that will have an impact on business and litigation.
Wells Fargo has reached settlement terms in a class action addressed to its opening of sham customer accounts.
In the underlying suit, plaintiffs alleged that the bank’s employees opened millions of unauthorized customer accounts in order to meet aggressive sales quotas and generate additional fees for the bank. It was also alleged that employees falsified customer signatures to create the sham accounts, which are estimated to exceed 2 million in total. Under the settlement, Wells Fargo has agreed to pay $110 million to affected class members. In May of 2015, Wells Fargo reached a separate $185 million settlement with the U.S. Consumer Financial Protection Bureau and other regulators in order to resolve an enforcement action based on the same practices.
Subway has agreed to pay $30.9 million to settle a class action alleging that it violated the Fair and Accurate Credit Transactions Act (FACTA) by printing prohibited information on credit and debit card receipts.
FACTA prohibits retailers from printing certain information — including full credit card numbers and expiration dates — on credit and debit card receipts in order to protect consumers’ privacy and credit information. The suit alleged that Subway printed the full expiration dates of customers’ credit cards and debit cards on receipts. The settlement potentially affects over 2.6 million people who received receipts showing their full credit or debit card expiration date since January 1, 2016 and is believed to be the largest FACTA settlement to date.
A federal district judge has rejected a proposed settlement of a class action against Google based on its practice of scanning users’ Gmail accounts in order to send targeted advertising.
Under the proposed settlement, class members would not receive any payments, but approximately $2 million in attorney fees and expenses would have been paid by Google. Among other things, U.S. District Judge Lucy Koh observed that the proposed settlement did not do enough to ensure future compliance with privacy laws and did not sufficiently address proposed modifications in relation to Google’s practice of email scanning to tailor advertisements for Gmail users. Under the Federal Rules of Civil Procedure, a court’s approval of an order resolving a class action is conditioned upon a finding by the court that the proposed settlement is “fair, reasonable, and adequate.” Based on Judge Koh’s rejection of the proposed settlement, class action plaintiffs must press on with their case pending any new proposal to resolve the action.
German prosecutors have raided the Munich office of Jones Day, the American law firm hired by Volkswagen AG to investigate the company’s diesel emissions scandal.
Jones Day was hired by VW’s supervisory board to investigate emissions cheating at the carmaker. As part of the undertaking, Jones Day authored a confidential report that exonerated senior management and assigned blame for the emissions scandal to high-level employees. The search of Jones Day’s Munich office appeared to be coordinated with a similar raid by prosecutors of VW’s head office and Audi division on the same day. Officials from VW condemned the searches as “unacceptable in every way” and indicated that it would seek legal recourse to oppose the action. Although the attorney-client privilege and like protections normally would be expected to prevent compelled disclosure of Jones Day’s files, prosecutors may have seized upon a gray area of German law to justify the raid.
The U.S. Supreme Court has applied First Amendment scrutiny to laws barring credit card surcharges.
In a recent case, the Supreme Court ruled that a New York statute that prohibits merchants from imposing a surcharge on customers who use credit cards is subject to scrutiny as regulating speech under the First Amendment. The Second Circuit, siding with credit card companies, had concluded the statute was a typical price regulation that regulated conduct, not speech, and did not violate the First Amendment. The Supreme Court disagreed, concluding the statute did not govern the amount that merchants collected as a pure price regulation, but instead governed the way that merchants communicated the prices they charged. The court remanded the case to the Second Circuit to consider whether the New York statute survived First Amendment scrutiny as a speech regulation.