A federal district court recently dismissed with prejudice a putative class action against the cryptocurrency exchange Coinbase, where the plaintiffs sought to hold the exchange liable for the sale of unregistered securities on behalf a nationwide class. The court held that Coinbase neither directly sold the accused tokens to plaintiffs nor actively solicited their sale, and thus plaintiffs’ federal claims must be dismissed. This decision has important implications for digital asset exchanges, which have faced a significant increase in class actions alleging the exchanges are themselves liable for the sale of unregistered securities.
Continue Reading Court Dismisses Class Action Seeking to Hold Cryptocurrency Exchange Coinbase Liable for Sale of Unregistered SecuritiesFinancial Services
SCOTUS Set to Resolve Circuit Split over Stays Pending Arbitration Appeal
By Marianne Spencer, Sonya Winner & Andrew Soukup on
The Supreme Court recently granted certiorari in a case to resolve a circuit split that has serious implications for companies who are unsuccessful in their efforts to enforce arbitration provisions in federal district courts.
In Coinbase, Inc. v. Bielski, No. 22-105, the defendant moved to compel arbitration in two putative class actions. The motions to compel were denied, and the defendant sought stays while it appealed the denials—which the Federal Arbitration Act gives defendants an automatic right to do. See 9 U.S.C. § 16. Both motions to stay were denied, and the Ninth Circuit affirmed both decisions.
Continue Reading SCOTUS Set to Resolve Circuit Split over Stays Pending Arbitration AppealS.E.C. Wins Summary Judgment Determination That Cryptocurrency Token Qualifies as a Security
By Sam Greeley, Andrew Soukup & Ashley Simonsen on
In a recent decision, a federal judge granted summary judgment for the Securities and Exchange Commission (SEC) finding that the LBC cryptocurrency token qualifies as a security. While the ruling is confined to this specific token, it represents a victory for the SEC’s assertions that many cryptocurrencies, including so called “utility tokens,” represent securities that need to be registered with the agency. The Court also held that the makers of the LBC token, LBRY, Inc., had fair notice that the token was subject to the securities laws. Considering the ongoing class actions and enforcement proceedings litigating this issue across several cases, companies operating in the cryptocurrency space, including cryptocurrency exchanges, should follow this development to assess any possible impact on their businesses.
Continue Reading S.E.C. Wins Summary Judgment Determination That Cryptocurrency Token Qualifies as a SecurityCalifornia Court Applies “Substance Over Form,” Allows True Lender Claim to Proceed
By Andrew Soukup, Ashley Simonsen & Matthew Verdin on
Posted in Financial Services, Litigation
May courts look beyond the face of a loan transaction to identify the “true lender”? In a lawsuit filed by California’s financial regulator, a California state court recently answered yes, finding that a fact-intensive inquiry into the “substance” of a loan transaction was necessary to determine who the “true lender” is and declining to dismiss a lawsuit. See Opportunity Fin., LLC v. Hewlett, No. 22STCV08163 (Cal. Super. Ct. Sept. 30, 2022).
Continue Reading California Court Applies “Substance Over Form,” Allows True Lender Claim to ProceedEleventh Circuit, Sitting En Banc, Reverses Panel Decision And Holds FDCPA Plaintiff Lacks Standing
The Eleventh Circuit, sitting en banc, recently applied TransUnion to hold that a plaintiff lacked Article III standing to bring claims under the Fair Debt Collection Practices Act. Hunstein v. Preferred Collection & Mgmt. Servs., Inc., No. 19-14434, 2022 WL 4102824 (11th Cir. Sept. 8, 2022)(en banc). The en banc decision reversed a controversial panel decision allowing a plaintiff to sue a collection agency for disclosing information about his debt to the agency’s mail vendor.
Continue Reading Eleventh Circuit, Sitting En Banc, Reverses Panel Decision And Holds FDCPA Plaintiff Lacks StandingThird Circuit Adopts “Reasonable Reader” Standard to Evaluate FCRA Claims.
By Marianne Spencer on
Banks, lenders, and other financial institutions who submit information to credit reporting agencies should take note of a recent Third Circuit decision adopting a “reasonable reader” standard for evaluating whether a credit report was inaccurate or misleading under Fair Credit Reporting Act (“FCRA”).
Continue Reading Third Circuit Adopts “Reasonable Reader” Standard to Evaluate FCRA Claims.Fifth Circuit Applies TransUnion To Conclude Plaintiff Lacked Standing To Assert FDCPA Claims.
By Sam Greeley on
The Fifth Circuit reversed a class certification order for claims under the Fair Debt Collection Practices Act (“FDCPA”) because the plaintiff lacked Article III standing. Perez v. McCreary, Veselka, Bragg & Allen, P.C., No. 21-50958, 2022 WL 3355249 (5th Cir. Aug. 15, 2022). The Court held that merely sending a letter to collect a time-barred debt, although a violation of the FDCPA, does not satisfy Article III’s injury-in-fact requirement.
Continue Reading Fifth Circuit Applies TransUnion To Conclude Plaintiff Lacked Standing To Assert FDCPA Claims.Update: Ninth Circuit Might Backtrack on When an Arbitrability-Related Question May be Delegated to an Arbitrator
By Class Actions Team on
Last September, we reported on a 2-1 Ninth Circuit decision holding that even if an arbitration clause appears to be unenforceable under the prospective waiver doctrine, a delegation provision requiring the arbitrator to decide that issue in the first instance is still enforceable. Brice v. Haynes Invs., LLC, 13 F.4th 823 (9th Cir. 2021). This decision reversed the district court’s order denying defendants’ motion to compel arbitration. Because the district court action was not stayed pending the appeal, it proceeded through class certification and pretrial motions. The Ninth Circuit now has vacated the panel decision and decided to rehear the case en banc.
Continue Reading Update: Ninth Circuit Might Backtrack on When an Arbitrability-Related Question May be Delegated to an ArbitratorLitigation Between FinTech Companies Follows Class Action Over Cryptocurrency Theft
By Sam Greeley, Ashley Simonsen & Micaela McMurrough on
This past week, co-defendants in a class action related to the theft of cryptocurrency engaged in their own lawsuit over alleged security failures. IRA Financial Trust, a retirement account provider offering crypto-assets, sued class action co-defendant Gemini Trust Company, LLC, a crypto-asset exchange owned by the Winklevoss twins, following a breach of IRA customer accounts. IRA claims that Gemini failed to secure a “master key” to IRA’s accounts, and that hackers were able to exploit this alleged security flaw to steal tens of millions of dollars of cryptocurrency. This lawsuit demonstrates the growing trend of cryptocurrency thefts resulting from cyber breaches, and ensuing litigation activity.
Continue Reading Litigation Between FinTech Companies Follows Class Action Over Cryptocurrency TheftA Closer Look: Arbitration Clauses Added to Account Agreements Face Risks After Supreme Court Declines Review of Sixth Circuit’s BB&T Decision
By Amy Heath & Andrew Soukup on
The Supreme Court recently declined to review the Sixth Circuit’s decision in Sevier County Schools Federal Credit Union v. Branch Banking & Trust Co., 990 F.3d 470 (6th Cir. 2021), which presents a potential challenge to enforcing arbitration clauses added to standard account agreements. The cert denial serves as a reminder that companies introducing arbitration agreements should take care to follow all contractual change-of-term requirements and create a record of affirmative customer assent whenever possible.
Continue Reading A Closer Look: Arbitration Clauses Added to Account Agreements Face Risks After Supreme Court Declines Review of Sixth Circuit’s BB&T Decision