Payments Docket, June 2022

JUNE 2022 | 5 AT&T filed a motion to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim, which the trial court granted on April 21, 2022. Notably, the trial court held that the employer could not state an express or implied breach of contract claim because it did not suffer any damages; rather, the allegedly stolen cryptocurrency belonged to the employee. The court also held that the complaint failed to adequately allege causation because “nothing in the complaint explains how Plaintiff Li’s temporary loss of ‘access’ to Defendant’s cellular service could have resulted in $500,000 worth of cryptocurrency being removed from an account maintained by a completely separate company.” Following dismissal, the plaintiffs filed an amended complaint restating the two prior breach claimsandaddingfournewcausesof action, includingastatutoryunauthorizeddisclosureclaim under the federal Communications Act, two California statutory claims—one for unauthorized computer access under the California Penal Code and the other under the California Customer Records Act—and a claim seeking a declaration that the underlying contract is unenforceable under California law. AT&T again moved to dismiss the amended complaint for failure to state a claim for relief, which currently remains pending before the trial court. A New Wave of Class Actions Challenges Bank “Buy Now, Pay Later” Payments Plans Michael Sliwa v. Sezzle Inc ., No. 2:22-cv-03055 (C.D. Cal.). “Buy now pay later” (BNPL) programs—which give retail consumers the option to spread payments over several installments, usually on an interest-free basis—are experiencing rapid growth. As those programs have grown, they have attracted the attention of plaintiffs’ law firms. Within the last two months alone, several putative class actions have been filed across the country against providers of BNPL programs. The gist of these lawsuits is that BNPL providers violate state consumer protection statutes by falsely representing the programs as interest free, when in fact BNPL users are potentially liable for bank overdraft fees when customer accounts have insufficient funds to cover BNPL installment payments. All of the suits allege that BNPL companies target low-income consumers who are allegedly most vulnerable to overdraft fees and related bank charges. One example is a suit brought in late May 2022 against Sezzle, which operates a BNPL service. The plaintiff alleges that he incurred overdraft fees when Sezzle attempted to draw an installment payment from his account and there were insufficient funds to cover it. The plaintiff claims that Sezzle markets its service as allowing purchasers to buy now, pay later with“no interest,”but fails towarn users of the risk that theymay become liable for insufficient funds fees or overdraft fees. The plaintiff also alleges that Sezzle knows that its BNPL service specifically targets low-income consumers who are more likely to incur large bank fees if they are unable to timely pay the installments. The complaint asserts claims for violations of California’s Unfair Competition Law, California’s False Advertising Law, and Minnesota’s Consumer Fraud Act. PENDING MOTIONS Payment Processor Seeks to Duck Merchant Class Action Alleging Excessive and Hidden Processing Fees Braids R Us 305, et al. v. Priority Payment Systems LLC, et al. , No. 1:21-cv-05318 (N.D. Ga.). Paul Judith Enterprises Inc., et al. v. Priority Payment Systems LLC, et al ., No. 1:22-cv-01305 (N.D. Ga.). In a filing in theNorthernDistrict of Georgia, payment processor Priority Payment Systems LLC asked the court to toss nearly all claims brought by a group of plaintiffs seeking to represent two nationwide classes of merchants that were allegedly charged excessive or hidden processing fees. Priority argued that the class action “is pled with the formulaic hyperbole that has become the tired signature of putative merchant class actions” and therefore fails to state a claim under Federal Rule of Civil Procedure 12(b)(6). Specifically, Priority argued that the plaintiffs’ fraud and breach of contract claims are doomed by the express terms of the parties’ contract, which allegedly permitted Priority to undertake the very actions underlying the putative class members’ claims. Priority also argued that the parties’ contract defeats the plaintiffs’ unjust enrichment claims as a matter of settled Georgia law and that the payment processor could not have violated the implied covenant of good faith and fair dealing by doing precisely what the contract permitted it to do. While Priority’s motion to dismiss was pending, the parties consented to consolidate a second—and nearly identical—case, Paul Judith Enterprises , into the Braids R Us litigation. If the court approves the consolidation, then the Paul Judith Enterprises litigation would be tolled pending resolution of the pending motion to dismiss. Technology Startup to Pay $58 Million to Settle Claims of Nearly 100 Million Putative Class Members In re Plaid Inc. Privacy Litigation , No. 4:20-cv-3056 (N.D. Cal.). Plaid Inc.—a technology startup providing bank“linking”and verification services for FinTech apps that consumers use to send and receive money from their financial accounts, such as Venmo, Coinbase, Cash App, and Stripe—sought final approval of its plan to settle the claims of nearly 100 million putative class members for a lump-sum payment of $58 million. In the underlying case, the plaintiffs alleged that Plaid deceived consumers into providing their bank account credentials by causing them to believe that they were entering their credentials on the financial institutions’ log-in pages when, in reality, they were providing that information directly to Plaid. Plaid is alleged to have then stored, analyzed, and sold “a staggering amount of consumer banking data.” Plaid sought dismissal on various standing- and claims-based grounds, which the court granted in part and denied in part. The surviving claims were for invasion of privacy/intrusion into private affairs and unjust enrichment, as well as a California-only class asserting California-specific constitutional and statutory claims. The parties’ settlement discussions escalated shortly thereafter, ultimately culminating in this settlement agreement.