by: Eva Novick and Lauren Butz

Several consumer protection-related bills passed in 2019 legislative session. All bills listed below have a January 1, 2020 effective date, unless otherwise noted. To view the full text of any bill, go to https://olis.leg.state.or.us/.

Data breach protections: SB 684 amends Oregon’s Consumer Identity Theft Protection Act. Under the re-named Oregon Consumer Information Protection Act, personal information includes a user name and password. Additionally, the bill requires third-party vendors, such as data storage companies, to notify the consumer-facing entity within 10 days of discovery of a data breach. The consumer-facing entity is then required to notify consumers and the Attorney General. The vendor must notify the Attorney General if the breach is of over 250 consumers or an unknown number. Lastly, the bill clarifies that entities subject to similar regulation, such as under HIPAA and GLBA, have an affirmative defense if they comply with those laws, for personal information that is covered under those laws.

Elder abuse proceedings: ORS 124.100(6) previously provided that a person commencing a civil action for the abuse of a vulnerable person must serve a copy of the complaint on the Attorney General within 30 days of bringing the action. SB 783 specifically addresses the holding in Bishop v. Waters, 280 Or. App. 537 (2016) by stating that failure to mail a copy of the complaint to the Attorney General may be cured at any time prior to entry of judgment.

Internet of Things: The Internet of Things refers to consumer “smart” devices which communicate with the Internet to send or receive data, such as routers, time clocks, home security cameras, or DVRs. HB 2395 requires manufacturers to equip these connected devices with reasonable security features. This bill will be enforced by the Attorney General and does not create a private right of action.

Manufactured dwelling marina resident protections: SB 586 provides, for the first time, the same protections for marina floating home tenancies that manufactured home parks tenancies receive. These protections include provisions for the sale of the facility in which tenants reside, moving the floating home at landlord’s cost, a required period of time in which to fix disrepair or deterioration, and allowing the tenant a longer storage period post-tenancy. Further, in lieu of, or in addition to, informal dispute resolution, the bill creates a mandatory mediation process. Additionally, for four years, the bill permits up to $200,000 in grants each biennium to attorneys to provide representation to low-income tenants. The bill also updates requirements for landlords that pass along utility charges to tenants.

Payday lenders: HB 2089 prohibits title loan lenders and payday loan lenders from making a loan to a consumer who has not fully repaid an outstanding title loan or payday loan.

Prescription readers for the visually impaired: HB 2935 requires pharmacies to notify customers of the availability of a prescription reading device and make such a device available to individuals who have visual impairments. (Effective 6/20/19.)

Redemption rights: A homeowner has a “right of redemption” 180 days after a sheriff’s sale of property under judicial foreclosure to pay the outstanding amount owed on the property and regain the home. Ordinarily, if a property is sold at auction for a price higher than the amount owed by the homeowner, the homeowner receives the excess funds. However, investors have started to engage in a practice where they offer to buy the homeowner’s redemption rights (often for a few hundred dollars), leading to a situation where the investor both retains the excess funds from the sale and holds the right to repurchase the property. SB 11 requires the purchaser of the redemption rights, the sheriff, and the entity foreclosing on the property to provide separate statutory notices to the homeowner regarding the possible rights lost by selling this interest, including the potential loss of right to surplus funds.

Sweepstakes: The current language of ORS 646A.803 limits the scope of sweepstakes violations to only those sent by US mail. HB 2397 updates the statute to include all types of sweepstakes violations, including internet-based violations. The updated statute is now consistent with the definitions used in OAR 137-020-0410.

Towing notice requirements: SB 372 reduces the period of time that a tower has to notify owners and lienholders that it placed a lien on a vehicle for its charges for the tow and storage. A tower may not obtain more than three business days of storage charges unless it notifies the owner and lienholder within three days of the tow, or within three days of receiving title information for a vehicle titled in a different state. (Effective 7/15/19.)

Failure to transfer title: Under SB 113, if a vehicle dealer does not timely transfer title, a customer can bring an action and recover attorney fees, if the customer made a written demand on the dealer not less than 30 days before filing a complaint and the dealer did not provide a remedy, including payment of reasonable attorney fees and costs, within those 30 days.

By: Young Walgenkim

On July 15, 2019, Governor Brown signed into law a bill that will greatly benefit consumers in Oregon. SB 113 is a bill intended to help Oregonians get title to the vehicles they purchased from car dealers. Yes, you read that correctly. Currently, Oregonians are purchasing vehicles from dealers and they are not receiving titles to the vehicles they purchased.

How does this happen?

In Oregon, when a dealer sells a vehicle to a consumer, the dealer typically does not have the title because the dealer purchased the vehicle on credit. After the sale to the consumer, the dealer is required to take the proceeds from the sale, pay off the lien on the vehicle to receive title, and submit the title transfer documents to the DMV all within 30 days of the sale.[1] However, dealers often fail to pay off the vehicle or otherwise transfer the title within the deadline dictated by the vehicle code. Sometimes, if the dealer goes out of business or is otherwise running a scam, consumers never receive their title. Some examples from the past news include Northwest RV Sales in Salem and Jones 5 Auto Sales in Corvallis.

Yes, but is this really a problem in Oregon?

Oregon DMV regulates vehicle dealers for violations of the vehicle code, which includes many different aspects of the dealer’s business. In its quarterly periodical, the DMV publishes a list of dealers who have been sanctioned for violations of the vehicle code, which can be accessed online. Tracking the data back to 2011, there have been an average of about 750 dealer sanctions per year, and about half of those are due to failure to process title on time. This is clearly a serious problem, and there are real victims to this practice. Several individuals came forward to testify at legislative hearings in 2017 as victims of this practice. One woman testified that she purchased a car, paid the entire amount but did not receive her title for two years.

But why can’t the DMV issue new title?

When these consumers find out that the dealer will not help them, the first thing they do is to contact the DMV. The victims at the hearing all testified that they called the DMV and asked them to issue new titles. They were all told that DMV could not do that and they need to hire an attorney to file an action in court to receive a court order before a new title would be issued. This means the consumer will have to pay out of pocket to hire an attorney to get them the title to the vehicle they already paid for. Clearly, something is not right with this situation.

How does SB 113 help?

SB 113 bridges this gap by allowing the victims to receive their attorney fees from the dealer or the dealer’s bond. The dealer had a duty to process the title, and its failure to process the title is already a violation of Oregon’s vehicle code. The consumer currently has a private right of action to get their remedy in court, but they rarely do so because they often don’t have the money to hire an attorney to get the title for the vehicle they already paid for. With the enactment of SB 113, Oregonians can finally receive title to the vehicles they purchased.

[1] If the dealer cannot meet the 30 day deadline, it can request an extension up to 90 days.

by: Matthew Kirkpatrick

On July 16, 2019, Oregon Attorney General Ellen Rosenblum hosted Consumer Law Section members for a lunch and discussion of consumer law issues.  Many Section members joined Department of Justice attorneys and law clerks to share their areas of practice and DOJ’s consumer protection activities.  Attorney General Rosenblum and Kelly Harpster—Attorney in Charge of DOJ’s Financial Fraud/Consumer Protection Section (and a former Chair of the Consumer Law Section)— highlighted some of the DOJ’s efforts over the past year to stop fraudulent business activities in Oregon and recover consumer losses.  DOJ activities include litigation and settlements or judgments in cases against predatory and deceptive student lenders, violators of data privacy laws, an auto manufacturer that violated environmental regulations, a deceptive car dealership, and consumer finance and health care litigation.  It also has ongoing litigation against Purdue Pharma for deceptively promoting OxyContin.  Several of the DOJ’s recent cases are highlighted in an August 11, 2019 website post, available at https://consumerlaw.osbar.org/2019/08/11/oregon-doj-consumer-protection-section-settlement-and-litigation-highlights/.  Additional information about the DOJ’s consumer protection activities, including the Consumer Hotline and the searchable consumer Complaints Database, can be found on the DOJ’s website at https://www.doj.state.or.us/consumer-protection.

During the lunch, Attorney General Rosenblum presented Section member David Sugerman with the inaugural Consumer Law Section Award of Merit.  The Award of Merit recognizes Sugerman’s more than three decades working to help low-income consumers in Oregon.  Sugerman was lead counsel in prosecuting and winning a $409 million consumer fraud class action case against BP for illegal debit card charges to consumers, an $85 million federal court win for Oregon veterans poisoned in Iraq by defense contractor KBR, and a multi-million-dollar settlement against Comcast for illegally charging cable TV late fees, among many other high-impact cases.  The cy pres provisions of the BP settlement will provide $33 million to Legal Aid Services of Oregon and an additional $33 million to establish a new non-profit dedicated to furthering consumer protection in Oregon.  Sugerman also serves on the Board of Directors of Public Justice, and is active with the ACLU and National Association of Consumer Advocates.  He received the Oregon State Bar President’s Award in 2008 and was admitted to the American Board of Trial Advocates in 2011.

Fittingly, after more than seven and a half years of litigation, trial, and appeals in the Scharfstein v. BP case, settlement funds were received and the cy pres trusts funded on July 16, 2019, the same day Sugerman received the Section’s Award of Merit.  Congratulations David and thank you for all of your efforts on behalf of Oregon consumers.

The Oregon State Bar Consumer Law Section also would once again like to thank the Attorney General and Department of Justice for hosting this year’s lunch and for their ongoing work to promote justice for consumers in Oregon.

By: April Kusters

The 2019 Oregon Legislature enacted new protections for a large subset of consumers: tenants. These new tenant protections, including SB 608, modify the information in this website’s August 2018 posting “Residential Rental Markets and Portland’s Relocations Assistance Program.” Like many areas of law, it is important to review the legislative session each year for any statutory changes or additions that may make old postings incomplete or outdated. By this time next year, this posting may well be missing pertinent information. Be advised.

For example,, the Portland Relocation Ordinance[i] references in the August 2018 posting remain accurate, however, Oregon’s no cause termination statute has changed and there is now statewide rent control.

No Cause Evictions versus For Cause Evictions: Historically, landlords had broad authority in most tenancies to terminate the tenancy without providing a stated reason or cause so long as the landlord gave proper notice. Under SB 608[ii], which became effective February 28, 2019, if a tenant has occupied their rental housing for one year or more, the landlord may only terminate the tenancy for an approved reason and the termination notice must state the cause for the termination. If the reason for the termination of the tenancy is not due to the conduct of the tenant, for example if the landlord intends to remodel or sell to a buyer who intends to reside in the home, then the landlord must give 90 days notice of termination of the tenancy to the tenant. In addition, if the landlord owns 4 or more units and the cause of the termination is not due to the tenant’s conduct, the landlord must pay relocation assistance in the amount of one month’s rent. If the tenant has occupied the rental unit for less than 1 year, or the landlord is both a roommate and landlord to the tenant, these protections do not apply.

Rent Control: Also under SB 608, during any 12-month period, landlords may not increase the rent more than 7% plus that year’s consumer price index. As an example, for 2019, this combined percentage is 10.3%. Landlords are not subject to this rent increase limitation if the first certificate of occupancy for the unit was issued less than 15 years before the rent increase or if the landlord is providing the until to a tenant as part of any affordable housing program or subsidy.

Sealing FED (Eviction) Records: Of special note to FCRA practitioners and others viewing credit reports, consumers with an Oregon residential eviction on their credit history or background checks records may have the ability to seal those eviction records starting January 1, 2020. Under SB 873[iii], a consumer may move the court to set aside the judgment and seal the official record under the following circumstances:

• The judgment included restitution, the money award has been satisfied and at least 5 years have passed from date of entry of judgment;
• The judgment was made by stipulation of the parties under ORS 105.145 and the consumer/tenant complied with the terms of the agreement and satisfied any money judgment; or
• The judgment was a judgment of dismissal in the tenant’s favor.

Additionally, the court is not allowed to charge a filing fee for the Motion to Set Aside/Seal. Many FED or eviction actions settle at the time of the first appearance.  As such, many evictions should be eligible under the bill beginning January 1, 2020.

These new tenant protections are complicated and nuanced. Thankfully the City of Portland has a Rental Services Office[iv] that runs a help line for tenants and landlords and the Oregon State Bar has a downloadable pamphlet[v] and Legal Q & A Videos[vi] on this topic.

[i] Portland City Code § 30.01.085

[ii] Senate Bill 608

[iii] Senate Bill 873 § 2(4)

[iv]City of Portland Rental Services Office

[v] “New Rules for Landlords”

[vi] “An Update to Landlord/Tenant Law in Oregon”

STUDENT LOANS AND EDUCATION

Career Education Corp. Multistate (January 2019)
Oregon helped lead a 49-state investigation into deceptive recruiting and advertising practices by for-profit education company Career Education Corp. CEC operated schools across the nation, including Le Cordon Bleu in Oregon. The $493.7 million settlement included $6.1 million in debt relief for 2,200 former students in Oregon and imposed heightened disclosure requirements.
https://www.opb.org/news/article/student-debt-career-education-corporation-oregon/

ITT/CUSO Multistate (June 2019)
Oregon helped lead an investigation by 43 states and D.C. into predatory loans made to ITT students. Under the settlement, CUSO will forgive $168 million in debt owed by former ITT students, including $2.2 million in relief for 242 Oregonians.
https://www.oregonlive.com/education/2019/06/justice-department-settlement-enables-former-itt-tech-students-to-shed-college-debt.html

The College Network (January 2019)
The College Network, a for-profit provider of online study programs for nursing students, went bankrupt after making predatory loans to students. Oregon negotiated a settlement with one of the credit unions that financed the debt. We Florida Credit Union agreed to cancel all remaining debt, approximately $400,000, for 91 Oregon students. The credit union also agreed to request that credit reporting agencies delete negative information and may not sell or assign the loans.

DATA PRIVACY/SECURITY

Premera Multistate (July 2019)
Oregon, Washington and California led a 30-state investigation into violations of HIPAA and unfair and deceptive practices by Premera Blue Cross, the largest health insurer in the Northwest. Due to lax security practices, the personal information of 10.5 million consumers was breached after a phishing attack. The breach went undiscovered for nearly a year. Oregon will receive $1.3 million of the $10 million settlement. The settlement is the largest multistate HIPAA settlement since attorneys general gained authority to enforce HIPAA.
https://www.oregonlive.com/politics/2019/07/premera-blue-cross-agrees-to-pay-104-million-to-oregon-29-states-after-massive-data-breach.html

Uber Multistate (December 2018)
Oregon helped lead an investigation by 49 states and D.C. into a data breach and attempted cover up by ride share company Uber. Over 600,000 drivers had personal information breached. Uber agreed to pay $148 million, the largest multistate privacy settlement at the time.
https://www.seattletimes.com/business/uber-reaches-148-million-settlement-over-its-2016-data-breach-which-affected-57-million-globally/

AUTO

Fiat Chrysler and Robert Bosch (January 2019)
Oregon helped lead an investigation by 49 states, DC and Guam into deceptive practices and environmental violations by Fiat Chrysler and Robert Bosch. The companies advertised environmentally friendly cars but used defeat devices to cheat emissions tests. The companies paid a combined $171 million, including $7.23 million to Oregon.

Oregon Plays Key Role in $171 Million Settlement with Fiat Chrysler and Robert Bosch for Environmental Breaches

Courtesy Ford Settlement (December 2018)
Oregon’s investigation found that Courtesy Ford misrepresented MSRP on their website and deceived consumers into spending hundreds of dollars on a theft deterrent product that they did not want. As part of the settlement, Courtesy Ford agreed to refund 6 consumers a total of $55,000 in restitution and refunded $438,000 to an additional 1,300 consumers who purchased the theft deterrent system.
https://www.kgw.com/article/news/investigations/check-your-mailbox-4000-oregonians-will-get-refunds-after-state-settles-with-local-ford-dealership/283-57830d7c-9080-4f2a-a26f-7919d9e95f18

CONSUMER FINANCE

Wells Fargo Multistate (December 2018)
50 states and D.C. resolved multiple investigations into Wells Fargo with a single settlement that addressed unfair or deceptive practices by Wells Fargo, including: opening over 3.5 million accounts without authorization, wrongfully charging mortgage rate-lock extension fees, and failing to refund unearned portions of auto GAAP insurance. Oregon received $9.7 million of the $575 million settlement, which to date is the most significant investigation of a national bank by attorneys general without a federal partner.
https://www.statesmanjournal.com/story/news/2018/12/28/wells-fargo-fake-accounts-settlement/2436451002/

Future Income Payments Litigation
The Attorney General and the Director of DCBS jointly sued Future Income Payments for making unlicensed, usurious loans deceptively marketed as “pension advances.” The court entered judgment in the amount of $5.9 million against the company, declared void all outstanding loans and prohibited the company from selling, assigning or collecting the loans. Since the suit, the principal, Scott Kohn, has been indicted on federal fraud charges.
https://www.nbcrightnow.com/news/future-income-payments-llc-fined-million-for-targeting-pensions-of/article_7291c456-70f3-11e9-850a-1b8b5ebab40a.html

HEALTH CARE

Opioids Litigation (Ongoing)
Oregon filed suit against Purdue Pharma in September 2018 for deceptively promoting OxyContin and violating a 2007 stipulated judgment with the Department of Justice. Trial is set for late 2020. Oregon filed a second suit in May 2019 against Purdue Pharma and the owners, the Sackler family, alleging fraudulent conveyance and seeking to hold the Sacklers personally liable for any unsatisfied financial claim Oregon has against Purdue.
https://www.oregonlive.com/crime/2019/05/oregon-sues-purdue-pharma-again-says-owners-unlawfully-marketed-opioids.html

Pfizer Drug Coupon Settlement (March 2019)
Oregon’s investigation found that Pfizer distributed deceptive marketing materials and coupons claiming consumers would pay no more than a certain amount for drugs when they actually paid much more. The settlement requires Pfizer to pay $975,000, refund money to 371 Oregon customers, and provides for grants to two Oregon charitable organizations to subsidize prescription drug costs for uninsured and underinsured residents.

AG Rosenblum Announces Large Settlement with Pfizer for Misleading Drug Pricing Coupons

By Colin D. A. MacDonald

In May, the U.S. Supreme Court ruled that third parties named in class action counterclaims in a state court action cannot remove that action to federal court. The ruling leaves open an avenue for consumers who are sued in a state court debt collection action to sue third parties about the underlying transaction without facing removal to federal court.

In 2016, Citibank sued George Jackson in North Carolina state court for sums it claimed he owed on a Citibank-issued credit card account that Jackson had with Home Depot. Jackson, in turn, filed third-party counterclaims against Home Depot and a local seller of water treatment systems under the state’s unfair and deceptive trade practices law. Jackson sought class certification for these claims and damages in excess of $5 million on behalf of the class. Citibank then dropped its underlying action, leaving only the third-party counterclaim before the court. At that point, Home Depot removed the case to federal court and Jackson challenged the removal.

In a 5-4 vote, the high court concluded that neither the Class Action Fairness Act (CAFA), nor the general federal court removal statute provided a basis for removal of the case. Writing for the majority, Justice Clarence Thomas wrote that the clear text of the statutes address the ability of defendants in “civil actions” to remove cases, not defendants to “claims.” As a result, although a party might be defending against a claim, that party is not a “defendant” with power to remove the case. Justice Thomas, though generally known for his conservative judicial leaning, was joined by the court’s four traditionally liberal justices in his opinion.

CAFA permits defendants in many large class action suits to remove the case to federal court, even if the case raises only state law claims and regardless of whether the defendant is based in the state where it is sued. The 2005 law was based on a view among its supporters that state courts were likely to favor classes of individuals over large corporations and that federal courts could more fairly adjudicate the dispute.

Justice Alito penned a sharp dissent, arguing that Home Depot was clearly a “defendant” in any ordinary meaning of the term. Indeed, he noted that by the time the retailer sought removal, the only claims before the court were those that Jackson brought against Home Depot. Alito’s dissent contended that the majority would permit use of third party counterclaims as a “tactic” to keep a class action in state court that CAFA would otherwise allow to be removed.

The opinion builds upon decades-old precedent holding that an original plaintiff defending against counterclaims may not remove the case, even if a federal court would have had jurisdiction had the counterclaim been filed first. In that case, however, a party could ostensibly avoid facing counterclaims in state court by not filing the initial action. The dissent argued that Home Depot had no such option, and thus Congress could not possibly have intended for CAFA to close the doors of federal courts to those defending against counterclaims only in this unique posture.

To that, Thomas’s majority opinion responded: “that result is a consequence of the statute Congress wrote.” If Congress dislikes what the law says, the majority concludes, the solution is for Congress – not the courts – to change it.

The case now returns to North Carolina state courts for further proceedings on the merits of Jackson’s claims against Home Depot.

Case citation: Home Depot U. S. A., Inc. v. Jackson, 587 U.S. ____ (2019).

Colin D. A. MacDonald is a Seattle-based consumer protection attorney for the Federal Trade Commission. The views expressed in this article are his own and do not necessarily reflect those of the Commission or of any individual Commissioner.

By: Jeremiah Ross

Most consumer and personal injury lawyers represent clients based on a contingency fee agreement. That means that the attorney will not get paid unless the client receives a settlement, award, or judgment in their favor. Many firms and attorneys defending lawsuits charge by the hour. They are then paid monthly by the corporate defendant or insurance company. This can often result in defense lawyers using tactics that are meant to drain the plaintiff’s attorney’s time, money, and resources in an effort to force the plaintiff to settle or divert the plaintiff’s lawyer’s attention from the critical issues in the case. These tactics can come at a price though, and an unpublished Ninth Circuit opinion sheds some light on the remedy available to a party who is subjected to litigation shenanigans.

In Beck v. Metro. Prop. & Cas. Ins. Co., 727 F. App’x 330 (9th Cir. 2018), the Ninth Circuit upheld a District of Oregon court award of an attorney fee multiplier of 2.0 due to the defendant’s litigation tactics. What this means is that the plaintiff lawyer’s attorney fee claim of $597,669.25 was doubled to $1,195,398.50 “due to the nature of this case and the conduct of Metropolitan and its Counsel.” Beck v. Metro. Prop. & Cas. Ins. Co., No. 3:13-cv-00879-AC, 2016 WL 4978411, 2016 U.S. Dist. LEXIS 126335, at *68 (D. Or. Sep. 16, 2016).

You are probably wondering how was the plaintiff was able to force the defendant Insurance company to pay double the amount of her attorney fees. Thankfully, John Acosta, United States Magistrate Judge, drafted a 56-page order that provides a clear road map for lawyers who are seeking an attorney fee multiplier in Oregon. In this breach of insurance contract case, Judge Acosta found the plaintiff had satisfied the proof of loss requirement under ORS 742.061. As a result the defendant was forced to pay plaintiff’s reasonable attorney fees. The question then became: what is the reasonable amount of fees?

The Judge used the ORS 20.075(1) and (2) factors to determine what was reasonable. First, the Judge rejected defendant Metropolitan’s argument that the ORS 20.075(1) factors apply only to the court’s determination whether to award fees and not the amount of fees, and not to the reasonableness of the fees. In doing so, the court provided clear guidance that both ORS 20.075(1) and ORS 20.075(2) factors are to be used to determine the reasonable amount of attorney fees to award.

The court then delved into the factors under ORS 20.075(1). The court evaluated the parties’ respective pre-litigation conduct and did not look kindly at Metropolitan’s attempts to resolve the case on unilaterally established terms. The court also looked at the objective reasonableness of the claims and defenses asserted by the parties under ORS 20.075(1)(b). In addressing that factor the court acknowledged that the case was a simple breach of contract case. However, the defense asserted unreasonable defenses in its answer, and advanced unreasonable arguments to use as the equivalent of defenses. For example, the defense asserted a merit-less “Fraud” defense. This is a common defense tactic in consumer cases, and the court did not take kindly to it. The court then delved into the various other ORS 20.075(1) factors and found they either weighed in plaintiff’s favor or they did not apply.

The court then turned to the ORS 20.075(2) factors. On review, the Ninth Circuit found that “the district court thoughtfully, carefully, and thoroughly considered each of the factors set forth in Oregon Revised Statutes §§ 20.075(1), (2) in light of the record as a whole. Beck, 727 F. App’x at 330-31. In doing so, the court addressed the prevailing market rates for legal services in the relevant community. In this case the plaintiff’s attorneys submitted expert declarations as expert evidence of the plaintiff’s attorneys’ skill and experience in insurance law and to support the hourly rates she requested. The court used the expert opinions and the 2017 Oregon State Bar Economic Survey to assist in establishing the attorneys’ respective hourly rates.

The court also addressed whether the fee is fixed or contingent factor under ORS 20.075(2)(h). The plaintiff’s lawyer initially worked under an hourly fee and then transferred to a contingency fee. The Beck case is similar to many consumer cases, because the defense used tactics which made it impossible for the plaintiff to pay the lawyer an hourly rate. However, the firm representing Ms. Beck continued to be able to do so under a contingency fee agreement. The court noted that the defense’s litigation strategy increased the risk to Beck’s attorneys that they might not be fully compensated for their time, and that factor weighed in favor of an attorney fee award.

The court then addressed the attorney fee multiplier. The court noted, “Oregon law permits an enhancement of fees when it is supported by the facts and circumstances of the case. See Griffin v. TriMet, 112 Or. App. 575, 585 (1992) aff’d in part and rev’d in part, 318 Or. 500 (1994) (approving trial court award of 2.0 multiplier).” The court then spent significant time addressing the facts leading up to the litigation and the defense’s litigation tactics. The court noted that the defense’s efforts to attempt to obtain irrelevant evidence through the discovery process, using theories that lacked any relevance, and the defenses disorganized or deliberately untimely approach to raising various issues resulted in the plaintiff incurring fees for having to respond to both the substance of the issues and their “procedural infirmity.”

However, the court limited the 2.0 multiplier to the fees the plaintiff only incurred during the litigation. The court concluded that pre-litigation fees that were incurred were not subject to the multiplier because the defense’s litigation counsel played no role in the parties’ negotiations.

Judge Acosta provided the legal road map to guide future litigants facing a defendant who desires to engage in litigation shenanigans in a fee shifting case. Hopefully the opinion will have a deterrent effect and help litigants combat such litigation tactics. The opinion is also a fantastic example of the various issues a fee petition should address and the arguments a fee seeking party may face. Lastly, the opinion is an excellent example of the facts and factors the court looks to when deciding if a fee multiplier is appropriate in a particular case.

 

 

By Michael Fuller

In Zabriskie v. Federal National Mortgage Association (9th Cir. 2019), a divided Ninth Circuit panel decided that Fannie Mae was not a “consumer reporting agency” under the Fair Credit Reporting Act. Accordingly, the opinion reversed the trial court and ruled against the Zabriskie family. The dissent determined that Fannie Mae was in fact a credit reporting agency, and would have ruled in favor of the Zabriskie family.

The case started when the Zabriskie family sued Fannie Mae under the Fair Credit Reporting Act. The Zabriskie family claimed that Fannie Mae’s Desktop Underwriter software falsely reported that the Zabriskie family had a foreclosure on their record, which interfered with their ability to get a home loan.

Judges J. Clifford Wallace and Susan P. Graber decided that Fannie Mae was not a credit reporting agency because it did not regularly assemble or evaluate consumer information. Instead, Judges Wallace and Graber found that Fannie Mae merely provided software that allowed lenders to assemble and evaluate consumer information. Judges Wallace and Graber also found that Fannie Mae was not a consumer reporting agency because the purpose of its Desktop Underwriter software was not to furnish consumer reports to third parties. Instead, the majority decided that the purpose of Fannie Mae’s software was to facilitate transactions between lenders and Fannie Mae.

In his dissent, Judge Lasnik pointed out that Fannie Mae knew its software was programmed in error to unfairly harm the Zabriskie family’s credit and Fannie Mae did nothing to correct the error. Judge Lasnik noted that the purpose of the Fair Credit Reporting Act was to “protect consumers against inaccurate and incomplete credit reporting”. Given the real world consequences of Fannie Mae’s credit reporting activities, the dissent determined that Congress did not intend to exclude Fannie Mae from liability under these circumstances.

In November 2018, the Federal Deposit Insurance Corporation (“FDIC”) published a request for information on small-dollar loans, such as payday loans.  On January 22, 2019, Oregon’s Attorney General, Ellen Rosenblum, joined the attorneys general of twelve other states and the District of Columbia in submitting a letter to the FDIC addressing some of the risks associated with such loans.   A copy of the letter is found here.

In the letter, the AGs state that the “short-term credit needs of [the unbanked and underbanked] households are largely met by the fringe financial sector” which are “‘often usurious,  sometimes  predatory,  and  almost  always  worse  for  low-income  individuals  than  the services offered by traditional banks to their customers.’” The borrowers of such loans can become trapped in an endless cycle of debt since they are often unable to pay the loans when they become due and have to take out new loans (and pay additional fees) to pay of the previous loans.   The letter outlined several legal risks for state-chartered banks seeking to enter the small-dollar loan sector.

I.    Evasion of State  Laws

While noting that “[m]any states have enacted laws to protect consumers from abuses associated with high-cost small dollar credit offered by fringe lenders” the AG’s letter recommends that the  FDIC discourage state-chartered banks from entering into relationships with fringe lenders that are structured to evade state rate caps in any guidance it issues on small-dollar lending.

One way in which fringe  lenders  have  attempted  to evade state restrictions is by  associating with traditional banks to take advantage of the fact that traditional banks are generally not subject to state interest rate caps.  As asserted in the letter, “this method became known as ‘rent-a-bank’ lending  because  the  bank  participated  only  by  lending  its  name  and  charter  to  the  transaction. Payday lenders would claim the bank was the lender, allowing it to take advantage of the bank’s ability to export its home state’s interest rate and evade the usury and other interest rate caps in the state where the borrower resides.” Recently, payday lenders have attempted to evade state restrictions by turning to Native  American tribes in an attempt  to take  advantage  of their tribal  sovereign immunity.

II.    Ability to Repay

The AG also recommended that the FDIC discourage banks from extending small-dollar loans without considering the consumer’s ability to repay.  In particular, the Ags recommended that  “the FDIC suggest that banks consider a consumer’s monthly expenses such as recurring debt obligations and necessary living expenses in evaluating ability to repay and take into account a consumer’s ability to repay the entire balance of  the  proposed  loan  at  the  end  of  the  term  without  re-borrowing.”  The AGS “also  recommend  that  the FDIC suggestthat banks at least consider the consumer’s capacity to absorban  unanticipated financial event –for instance, in the unexpected event of a loss of income or the added expense of a medical emergency–and, nonetheless, still be able to meet the payments as they become due.”