4th Circuit Contract Law News - U.S. Fourth Circuit
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There's no end to the creativity payday lenders will go to extract huge interest rates out of desperate people. When states started to regulate them, payday lenders ingeniously contracted with Indian tribes, who were more than happy to share a cut of the money so that payday lenders could be exempt from state usury laws.

And thanks to binding arbitration agreements, disputes won't go to court. But what happens when a debtor challenges a payday loan's validity in a bankruptcy proceeding? The Fourth Circuit is here to find out.

No Need to Dispute Debt to Receive FDCPA Protections

Dianne Russell owned $501 for an unpaid hospital debt. The hospital sicced Absolute Debt Collection Services on her. They sent a threatening letter. She paid the hospital directly. ADC continued to bug her, even after she told them about her payment to the hospital.

She, predictably, sued under the Fair Debt Collection Practices Act, as well as state law. ADC argued that the FDCPA didn't apply, as she never disputed the debt under § 1692g.

The problem is, § 1692g (debt validation) is an optional tool for debtors, not a prerequisite to protection against abusive debt collection practices.

Fourth Circuit Reads FDCPA's Plain Text, Joins Circuit Split

Do consumers have to dispute debts in writing in order to avail themselves of the protections of the Fair Debt Collection Practices Act (FDCPA)?

The Second, Ninth, and now Fourth Circuits all agree: the plain text of the FDCPA, even when the result is a wee bit odd, controls. Oral is okay, but written brings more protection. And then, there's the Third Circuit, which is willing to read things into the text that aren't there, for the sake of making the statute make sense.

What's got the circuits split? It's a question we see all too often: sloppy statutory drafting or intended as written?

Epic's Victory Over Silicon Knights in Video Game Dispute Affirmed

A bit of background for all of you non-gamers out there. Epic Games is the creator of the Unreal Engine (and the criminally-underrated Jazz Jackrabbit), industry-standard software used by many developers to make video games. To date, there have been three versions of the engine released, with a fourth planned for release soon.

Silicon Knights licensed Unreal Engine 3 for use in creating video games for the seventh-generation of PC hardware and consoles (Playstation 3 and Xbox 360), but was unsatisfied with the engine and Epic's support and documentation. They sued, but were slapped with a countersuit for failure to pay royalties, theft of trade secrets, copyright infringement, and breach of contract.

VA's 'Certificate of Need' Law Pretty Much Unconstitutional

Virginia has this pretty onerous rule. If a medical service provider wishes to open a facility in a Virginia market, it has to first obtain a certificate of need. Not only does the certificate cost significant money, but it requires navigating a maze of bureaucratic processes to complete the approximately seven-month process. And if any person (including competing existing businesses) requests an "informal fact-finding" session, the process can take years.

Does it violate the dormant interstate commerce clause? It seems likely that it does -- it places a hefty burden on new operations, one if its purposes is to protect "existing" (by definition, in state) businesses, etc. And while the district court dismissed two plaintiff medical companies' claims, the Fourth Circuit, in an unusually direct reversal, all but killed the law.

Accidental Death and Dismemberment: Pay Up for DUI Death

Ever wonder why insurance policies include 10,983,267 exclusions and are 3,423 pages long?

This is why.

Richard Johnson had an Accidental Death & Dismemberment policy through his employer. He also had a few too many drinks before his car veered off the highway, through a sign, and flipped multiple times. The cause of death was internal injuries from a motor vehicle accident. The toxicology report measured his BAC at 0.289 percent.

4th Forces Arbitration, Citing SCOTUS Concepcion Decision

Samuel Muriithi drove an airport shuttle for Shuttle Express. He did so not as an employee, but as a franchisee. Of course, he alleges that the arrangement was a misclassification and that he was entitled to more pay, overtime, etc. under the Fair Labor Standards Act.

Alas, the parties haven't even reached that important question yet. You see, their agreement included an arbitration clause. Shuttle Express pushed for enforcement of the clause but the district court ruled that it was unconscionable due to three provisions in the contract: the class action waiver, the requirement that the parties "split" arbitration fees, and the one-year limitations period for asserting claims.

The Fourth Circuit vacated the district court's opinion, citing AT&T Mobility LLC v. Concepcion, and kicked the case to arbitration.

Conversion Exclusion Doesn't Completely Bar Arson Recovery

A reasonable person might think, "If I intentionally set my trucks on fire, my insurance policy won't cover it. Because, yeah. Arson."

That reasonable person might be wrong.

In an unpublished opinion, the Fourth Circuit Court of Appeals ruled this week that State Farm was required to pay Wells Fargo for two torched trucks because the insurance policy's conversion exclusion did not unambiguously bar coverage.

Beneficiary Can Seek Equitable Relief Remedies Under ERISA

The Fourth Circuit Court of Appeals ruled this week that equitable relief remedies are available to a life insurance beneficiary to redress violations of Employee Retirement Income Security Act (ERISA) or ERISA plans.

The Fourth Circuit panel vacated its earlier stance this week after rehearing the case.

Class Actions, Loan Servicing, Acceleration Dates, Oh My!

While public opinion has favored borrowers since the mortgage meltdown, the federal courts occasionally side with the mortgage industry.

Last week, the Fourth Circuit Court of Appeals issued an opinion siding with a loan servicer in a fee dispute involving acceleration dates.