Defendant Preferred Collection Petitions for Rehearing in Eleventh Circuit

On Tuesday, May 25, 2021, Preferred Collection and Management Services, Inc. (“Preferred”) filed its Petition for Rehearing and for Rehearing En Banc in the matter Hunstein v. Preferred, No. 19-14494-HH (11th Cir. April 21, 2021) (as corrected May 5, 2021), petition for reh’g filed May 25, 2021.

Plaintiff initially filed suit against Preferred April 24, 2019, alleging violations of the Fair Debt Collections Practices Act (FDCPA) and Florida law with regard to Preferred’s attempts to collect on a debt owed by Plaintiff. Specifically, Plaintiff argued that Preferred’s transmittal of debt collection data to a mail vendor for the sole purpose of preparing and mailing the letter to Plaintiff violated the FDCPA and state law.

Preferred moved to dismiss Plaintiff’s Complaint pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, which motion the district court granted October 29, 2019. Plaintiff appealed and the Eleventh Circuit Court of Appeals issued an opinion April 21, 2021, reversing the district court and remanding. Preferred filed for rehearing Tuesday, May 25, 2021.

In its Petition for Rehearing, Preferred argues the Circuit Court misinterpreted 11th Circuit and Supreme Court precedent by holding that, despite Plaintiff not suffering any tangible harm or risk, he nonetheless suffered a concrete harm in light of the close relationship between 15 U.S.C § 1692c(b) and the common law tort of public disclosure of private facts. Preferred argued in its Petition for Rehearing that this conclusion by the Court was not in-line with precedent. Preferred further argued that the Court failed to consider whether the injury was “particularized” or “personal” to the Plaintiff. Instead, as Preferred notes in its brief, the Court actually expressed doubt the alleged “harm” occurred or was likely to occur.

Preferred further emphasizes that the Circuit Panel failed to examine whether Plaintiff’s claims were of the type that bore any relationship to a harm protected at common law—which Preferred argues they are not. In support, Preferred noted the difference in the electronic transmission of information to private server of an agent of Preferred and the common law tort of public disclosure because such transmission is not “public.” Preferred maintains that such a transmission would not be highly offensive to a reasonable person and that “invasion of privacy” is not one of the enumerated purposes of the FDCPA.

Finally, Preferred asserted in its Petition for Rehearing that the Court’s conclusion that the use of third-party vendor violated the FDCPA was unsupported by (1) the text of the FDCPA, which references telegrams, thereby recognizing the ministerial use of third-parties in order to facilitate non-abusive communications with a consumer; (2) prior similar case law in other jurisdictions; and (3) the Consumer Finance Protection Bureau’s recognition of the use of this type of letter vendor in its forthcoming amendments.

More information on this matter will be forthcoming. Check The Rudnicki Firm’s online alerts to monitor the Court’s decision with regard to rehearing and any additional information on this case.

Oklahoma Supreme Court Rules on Waiver of Arbitration Provision

In an opinion issued Tuesday, May 19, 2021, the Oklahoma Supreme Court overturned the decision of the Oklahoma Court of Civil Appeals and held that the defendant did not waive its right to arbitrate pursuant to a term in its contract with the plaintiff.

In Howell’s Well Service v. Focus Group Advisors, 2021 OK 25, No. 117804 (Okla. 2021), the Oklahoma Supreme Court addressed the issue of whether a defendant waived its right to compel arbitration by not including it as an affirmative defense in its responsive pleading. Alternatively, the Court also considered whether the defendant had waived its right to arbitrate according to the equitable balancing test as outline in Oklahoma Supreme Court precedent.

The Plaintiffs in Howell Well Servicers were investors at the Defendant investment firm. The agreement between Plaintiffs and Defendant contained an arbitration provision. The Plaintiff filed suit in May 2013—the specifics of which claims were not included in the appellate opinion—but did not serve Defendant until nearly one and a half years later. Defendant answered in February 2015, but did not raise the arbitration provision in its answer.

The case fell mostly silent for another seventeen months, at which time Defendant filed a motion to compel arbitration. A status conference was set regarding the motion, but was stricken in favor of mediation. Mediation ultimately failed, however, and the case date dormant for another two years until Plaintiffs against requested the setting of a status conference on Defendant’s motion to compel arbitration.

After a hearing on Defendant’s motion, the trial court held: 1) Defendants waived the right to arbitration by not raising in their Answer, and (2) the late assertion of the right would be prejudicial to the Plaintiffs. The Court of Civil Appeals affirmed the trial court and the Supreme Court granted Certiorari.

In reviewing on appeal, the Supreme Court firstly considered whether the Oklahoma pleading statutes required a defendant to plead the right to arbitrate as an affirmative defense in its responsive pleading. The Court looked to Oklahoma’s strong public policy in favor of arbitration, as well as Tenth Circuit case law applicable to the federal counterpart of the Oklahoma Uniform Arbitration Act. The Supreme Court further noted prior opinions from the same division of the Court of Civil Appeals which the Supreme Court read as running contrary to the Court of Civil Appeal’s holding in this case. All these considered, the Supreme Court held that Oklahoma law did not require Defendant to plead the arbitration provision in order to avoid waiver.

The Supreme Court secondly considered whether the Defendant waived its right to compel arbitration according to the equitable factors put forth by the Court of Civil Appeals in Northland Ins. Co. v. Kellogg, 1995 OK CIV APP 84, ¶ 8, 897 P.2d 1161, 1162. After applying the fact-intensive, six-factored balancing test to the facts at hand, the Court concluded that the Northland factors weighed against a finding of waiver by the Defendants. In so holding, the Supreme Court noted such things as the Defendant’s inactive role in the litigation, lack of discovery, lack of trial dates or scheduling order, and the Plaintiff’s own lengthy delays.

This decision by the Oklahoma Supreme Court on the first impression issue of the inclusion of a right to arbitrate within a responsive pleading indicates a refusal by the Court to read an additional requirement into the Oklahoma pleading statutes. Further, the application of the Northland factors indicates the Court’s approval of this equitable analysis in determining whether a party waived its right to arbitrate and confirms Oklahoma’s strong favor of arbitration.

Texas Supreme Court Rules on Issue of Control by Independent Contractor

In an opinion issued Friday, May 7, 2021, the Texas Supreme Court upheld the trial court’s grant of summary judgment in favor of the defendant on the issue of control over an independent contractor.

In JLB Builders, LLC v. Hernandez, No. 20-0368, 2021 WL 1822947 (Tex. 2021), the employee of a subcontractor for a high-rise construction project was injured on the job. The injured person filed claims of negligence against the general contractor, who had an independent contractor relationship with the plaintiff’s employer. The defendant/general contractor filed a motion for summary judgment, asserting that it did not owe a duty to plaintiff because it did not have actual or contractual control over the plaintiff. The trial court agreed and granted defendant’s motion. An intermediate court of appeals reversed. The Supreme Court of Texas granted certiorari.

In reversing the court of appeals and upholding the trial court’s grant of summary judgment in favor of defendant, the Court ruled that, based upon the facts in the case, the defendant did not have actual control over the plaintiff. In so concluding, the Court noted that in order to give rise to a duty, a contractor’s control “must extend to the timing and sequence of the particular independent contractor’s work,” and that “the general right to order work started and stopped and direct when and where the work is done does not give rise to a duty of care.” Further, the Court held that the defendant’s requirement that plaintiff wear a safety harness did not increase the risk or severity of injury, so that the requirement did not amount to control giving rise to a duty to the plaintiff.

The Court also ruled that the defendant did not have contractual control over the plaintiff. The contract delegated supervisory duties to the subcontractor and withheld from the defendant the authority to direct and control the “means, manner or method” of the work. The Court noted that the “general supervisory authority with respect to subcontractor scheduling” does not give rise to a duty of care by an independent contractor. As such, the Court determined that there was similarly no controverted issue of fact regarding the defendant’s contractual control over the plaintiff.

This ruling from the Texas Supreme Court indicates the continued existence of a high bar for plaintiffs seeking to establish a duty of care owed by independent contractor defendants. The opinion also demonstrates, however, that the relevant legal analysis is fact-intensive and dependent upon the unique circumstances of each case.

U.S. Supreme Court Adopts Narrow Construction of TCPA in Unanimous Decision

In a 9-0 opinion issued on April 1, 2021, the United States Supreme Court held that the Telephone Consumer Protection Act of 1991 (TCPA) defined “automatic telephone dialing system” (ATDS) to include only those devices which have the capacity to store or produce a telephone number using a random or sequential number generator.

 This ruling in Facebook, Inc. v. Duguid, one of the most influential rulings on the TCPA to date, resolves a Circuit split regarding the definition of ATDS. The Supreme Court’s opinion ultimately aligned with Facebook, the federal government, and more than a dozen amici curiae’s stance that the 9th Circuit’s ruling below—construing broadly the TCPA’s prohibition on robocalls to outlaw notifications such as Facebook’s security verification texts—should be overruled. Facebook’s arguments on appeal, and the Supreme Court’s decision, hinged largely upon a narrow construction of the statutory text.

 The decision presents welcomed clarity regarding the growing inconsistency amongst the Circuit courts regarding the application of the TCPA’s regulation of ATDS. The ruling is expected to curb the growing number of putative class actions seeking to establish liability of corporate actors for similar electronic notifications under this decades-old statute.

Texas Chief Justice Gives State of Judiciary Address

At noon today, the Chief Justice of the Texas Supreme Court, the Honorable Nathan L. Hecht, gave the annual State of the Judiciary Address. While the Justice did not provide specifics, his comments indicate where the Texas judiciary sees itself going over the next year. Most notably, he revealed that the Texas judiciary plans to keep using remote platforms for proceedings, including all jury trials except for “complex civil matters” and felony cases. Under the Texas Supreme Court’s Emergency Order No. 36, courts may require, without the parties’ consent, that proceedings take place remotely. This authority extends to jury trials as well, save for felony cases. According to Justice Hecht, Texas district court judge, the Honorable Emily Miskel, conducted the nation’s first virtual jury trial last year; overall, thirty-five virtual trials have been conducted in Texas. The full State of the Judiciary Address can be accessed using this link: https://www.txcourts.gov/SOJ .

OSHA is Considering Implementing a COVID-19 Emergency Temporary Standard by March 15, 2021; What does that Mean for You?

Introduction

            With every new Administration comes a new approach to regulating workplace safety. The unprecedented COVID-19 pandemic has put added pressure on the Biden Administration to urge action by the relevant agencies. The resultant action could create new standards for employers under OSHA as early as March 15, 2021 in the form of an emergency temporary standard (“ETS”). Here is what you need to know:

Executive Order

            On January 21, 2021, President Biden issued an Executive Order titled “Protecting Worker Health and Safety” (“the Order”).¹ The Order directed that the Occupational Safety and Health Administration (OSHA) “issue, within 2 weeks of the date of [the Order] . . . revised guidance to employers on workplace safety during the COVID-19 pandemic.” The Order further directed OSHA determine whether an emergency temporary standard (“ETS”) regarding COVID-19 workplace safety would be necessary, and if so, to issue such an ETS by March 15, 2021.

On January 29, 2021, the U.S. Department of Labor announced that OSHA issued stronger guidance relating to preventing COVID-19 exposure in the workplace.² The updated guidance included heightened recommendations, including that employers:

·       Conduct a hazard assessment;
·       Identify control measures to limit the spread of the virus;
·       Adopt policies for employee absences that don’t punish workers as a way to encourage potentially infected workers to remain home;
·       Ensure that coronavirus policies and procedures are communicated to both English and non-English speaking workers; and
·       Implement protections from retaliation for workers who raise coronavirus-related concerns. Id.

 Importantly, OSHA acknowledged that the new guidance is “not a standard or regulation, and it creates no new legal obligations.” Id. Regarding a binding rule, newly appointed Principal Deputy Assistant Secretary of Labor for OSHA, Jim Frederick, stated in a virtual news conference on January 29, 2021, that he was unsure whether OSHA would issue an ETS regarding COVID-19 exposure prevention, but that it’s “something [OSHA is] deliberating about and [will] be working on.”³

What is an ETS?

            Emergency Temporary Standards, ETS, are promulgated in accordance with Section 6 of the OSH Act (“the Act”). ETS allow OSHA to promulgate a rule without the usual notice, comment, and hearing requirements in narrow, emergency circumstances. 29 U.S.C. § 655(c). The Act provides that ETS can be issued, and take immediate effect upon publication in the Federal Register, if the Secretary of Labor determines:

(A) employees are exposed to grave danger from exposure to substances or agents determined to be toxic or physically harmful or from new hazards, and

(B) such emergency standard is necessary to protect employees from such danger.

Id. Once an ETS is issued, it remains effective until a rule is promulgated in accordance with standard procedure, for which proceedings the ETS will serve as the proposed rule. Id. The non-emergency, permanent rule must be promulgated within six (6) months of the publication of the ETS. Id.

            In addition to the federal OSHA standards, 28 out of 50 states have chosen to self-implement OSHA-approved “State Plans” relating to limiting the spread of COVID-19 in the workplace, which must be “at least as effective in providing safe and healthful employment . . . as the [federal OSHA] standards.” 29 U.S.C § 667(c)(2).⁴ Ordinarily, states that have elected to implement State Plans have six (6) months to adopt a permanent rule. In the instance of an ETS, however, states with State Plans have thirty (30) days from the effective date to adopt the emergency standard. 29 C.F.R. § 1953.5.

To Whom Would the ETS Apply?

            OSHA regulations apply to most private employers and their workers, and also some public sector employers.⁵ Businesses with fewer than ten (10) employees, and businesses that meet certain other enumerated qualifications for full or partial exemption from OSHA standards, may not be required to maintain injury and illness records and may be exempt from regular OSHA inspections.⁶ Certain organizations and employees are also fully exempt from OSHA standards.

            If your business is in a state that has adopted a “State Plan,” you may be subject to different qualifications and/or exemptions for regulation under that state’s OSH standards.

When and How Does an ETS Bind Employers?

            An ETS becomes effective immediately upon publication in the Federal Register. 29 U.S.C. § 655(c). In the event an employer cannot immediately comply with a new rule by the effective date, however, that employer may apply for a temporary or permanent variance. Id. § 655(d).⁷ Such a request, however, must also be accompanied by notice to employees regarding the request for a variance and an opportunity to participate in the hearing. Id. For states with State Plans, the employer should apply to the state OSH entity for any such request. As a note, OSHA has issued several industry-specific memoranda regarding discretion in enforcing new COVID-19 prevention regulations. Generally, “OSHA is providing enforcement flexibilities for specific provisions of certain standards and requirements . . . .”⁸        

Next Steps Regarding OSHA Workplace COVID-19 Requirements

            The January 21, 2021 Executive Order directed that OSHA decide by March 15, 2021, whether an ETS regarding updated COVID-19 prevention regulations is necessary. And if so, the Order directed that OSHA issue an ETS by that same date.

If OSHA does issue an ETS, the issuance will start the clock on formal rulemaking for a permanent rule, based upon the ETS, which must be issued within six (6) months. This expedited timeline will be difficult in light of the arduous formal rulemaking process, including such items as (1) notice of intent and request for information and interviews; (2) development of a proposed standard; (3) publication of the proposed standard; (4) analyzing submitted comments; (5) developing the final rule; and (5) publication of the final rule. 29 U.S.C. § 655(b).  While some of these steps will be completed as a matter of course upon the issuance of an ETS (i.e. the development and publication of the proposed standard), the public notice, comment, and hearing requirements ordinarily consume several months’ time.⁹

Employers should not anticipate a permanent rule earlier than six months, but they can at least reference the ETS (if issued) as an indication of the permanent measures they are required to implement with regard to COVID-19 workplace safety. Between now and March 15, 2021, employers should closely monitor OSHA communications and anticipate the need to move quickly to implement emergency measures.

Who Can Answer My Questions?

The Rudnicki Firm continues to monitor these developments and will be available employers for questions and guidance upon OSHA’s issuance of an Emergency Temporary Standard.

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¹ Executive Order on Protecting Worker Health and Safety, White House, January 21, 2021, https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/21/executive-order-protecting-worker-health-and-safety/.

² US Department of Labor issues stronger workplace guidance on coronavirus, OSHA National News Release, U.S. Dep’t Labor, January 29, 2021, https://www.osha.gov/news/newsreleases/national/01292021-0.

³ The ‘first step:’ OSHA updates COVID-19 guidelines as Biden administration focuses on worker safety, Safety & Health Magazine, February 21, 2021, https://www.safetyandhealthmagazine.com/articles/20798-the-first-step-osha-updates-covid-19-guidelines-as-biden-administration-focuses-on-worker-safety.

⁴ For a complete list of states opting to implement self-regulated “State Plans,” please see the list provided on the OSHA website. U.S. Dep’t of Labor, OSHA, State Plans, Frequently Asked Questions, “What is an OSHA-Approved State Plan?”, https://www.osha.gov/stateplans/faqs.

⁵ U.S. Dep’t of Labor, OSHA, Help for Employers, “Am I covered by OSHA?”, https://www.osha.gov/employers#:~:text=OSHA%20covers%20most%20private
%20sector,an%20OSHA%2Dapproved%20state%20program.

⁶ Id., Recordingkeeping, “OSHA’s Recordkeeping Rule,” https://www.osha.gov/recordkeeping/2014.

⁷ See also Id., Law and Regulations, “OSHA Standards Development,” https://www.osha.gov/laws-regs/standards-development.

⁸ Id., COVID-19, “Regulations,” https://www.osha.gov/coronavirus/standards.

⁹ Richard Fairfax, On Safety: An OSHA emergency temporary standard for COVID-19?, Safety & Health Magazine, February 1, 2021, https://www.safetyandhealthmagazine.com/articles/20797-an-osha-emergency-temporary-standard-for-covid-19-is-it-necessary (stating that formal rulemaking ordinarily takes between 53 months to 138 months).

ALERT: Senate Expected to Confirm Biden's Nomination for the Consumer Financial Protection Bureau Director.

I.                What’s changed with the CFPB?

Nothing yet—but on Tuesday, March 2nd the Senate Committee on Banking, Housing and Urban Affairs will hold hearings on Biden’s nomination for the Director of the Consumer Financial Protection Bureau (“CFPB”). The CFPB is a highly polarized agency—largely suppressed under the Trump administration, the agency is repositioning to flex its authority over certain lenders, servicers, and debt collectors again. Dave Uejio has been the acting Director since January 20, 2021 and will continue to serve in that role until Biden’s nomination is confirmed.

Biden has named Rohit Chopra, a Democrat who has served as the Federal Trade Commissioner since 2018, as his nominee. In his Commissioner role, Chopra focused on scrutinizing and closely monitoring “Big Tech” corporations to the extent they threaten privacy, national security, and fair competition. Biden’s nomination of Chopra is unsurprising, as Chopra has worked in the CFPB before.

Senator Elizabeth Warren initially organized the CFPB in response to the 2008 financial crisis. Warren hired Chopra as the Assistant Director, a position he held for five years. During his time at CFPB, Chopra spearheaded the agency’s protective efforts regarding student loans; he also served as a special advisor for the Department of Education. He worked to improve servicers’ treatment of student borrowers, and he helped develop tools to aid student borrows in making better decisions.

II.             What can we expect?

As an initial matter, it is expected that the Senate will confirm Chopra. The Director position is a five-year term, but as of June 2020, the President may remove the CFPB Director at will. Notably, when Congress first created the CFPB under the Dodd-Frank Act, the President’s ability to remove the agency’s Director was relatively limited. The President’s recently reinterpreted power over the Director’s employment may act as an additional source of influence on the policies and priorities of the CFPB, but it’s too soon to tell.

Companies should expect a return to a more active CFPB. Chopra is expected to take a view of the CFPB’s role and power more akin to that of Richard Cordray, the first CFPB director. We are likely to see the CFPB being more aggressive in wielding its significant rulemaking, supervision and enforcement authority.

Chopra is highly critical of private student loan servicers, and, consistent with the acting Director’s public statements, it is likely that Chopra will take immediate action to address borrowers injured by the pandemic. Given the pandemic’s impact on student borrowers specifically, servicers can expect a renewed, and likely strengthened, interest in restricting servicing practices and enforcing those restrictions.

Enforcement actions are also likely to increase under Chopra. In a statement to Congress, Chopra described the Trump-era CFPB’s debt collection enforcement as “tepid” signaling that his enforcement, in this and other areas, are likely to increase. Indeed, Chopra has commented that he intends to aggressively seek monetary relief when carrying out his enforcement duties.

It is further expected that Chopra’s history with both the CFPB and the FTC will result in greater cooperation between the agencies in enforcement actions. Specifically, Chopra hopes that improved cooperation will allow the FTC to benefit from the CFPB’s ability to obtain civil monetary penalties. Should the Supreme Court rule that the FTC cannot seek restitution via injunctive relief under Section 13(b) of the FTC Act, which appears to be likely, the FTC will have a strong incentive to cooperate with the CFPB moving forward.

III.           What actions should we take?

Companies that are subject to the CFPB’s authority should conduct internal reviews of policies, procedures, practices, and customer communications in order to proactively address any deficiencies or inconsistencies. For some companies, this process is likely already begun to address the CFPB debt collection rules that go into effect in November of this year. Companies should consider broadening the scope of that review in an effort to ensure compliance and avoid coming under the scrutiny of the CFPB under this new leadership.

Considering Biden’s current stance on student loan debt, servicers should be particularly vigilant. While Biden’s constitutional authority to forgive large amounts of federal student debt is unclear, he has indicated his resolve to lower federal student loan debt, whether by executive order or Congress.

Hilary Palazzolo Quoted in Intelligent Insurer Article

“We are already seeing individuals and companies sharing more information with third parties. The use of dash cams, telematics and electronic logging devices, for example, are already being used to provide additional analytics for insurers. Insurers are also starting to use data collected from others to price the risk.”

-Hilary Palazzolo quoted by Intelligent Insurer

Uber Debacle Illustrates Challenges of Insuring Gig Economy- By James River

James River has withdrawn its coverage of Uber because changes in its business model and regulatory changes in California in particular made the account unprofitable. But other insurers are stepping in – and technology may hold the key to making such business profitable for insurers long term.

On December 31, 2019, specialty insurer James River cancelled all of its policies issued to Raiser, an affiliate of Uber. The move was prompted by the company reporting a net loss of $25.2 million in the third quarter of 2019, which it attributed in large part to the lack of profitability on the Uber account.

James River insured Uber in 20 states, Puerto Rico and the District of Columbia. The policies sat in its commercial auto line of business within its excess and surplus lines. The move was even more noteworthy because they were not set to expire until the end of February 2020.

But the company’s move highlighted a bigger issue. Companies such as Uber are cutting edge in what they do, and their business model has disrupted entire industries. But a consequence of this is that the dynamics in their business and sector can also change very fast – and it can be tough for insurers to keep pace….(the full article can be found on the Intelligent Insurer website at the link below).