Liability for Third Party Vendor Conduct
By: John D. Finerty, Jr. and Benjamin A. Kaplan
Many services in today’s economy are being outsourced to third-party vendors, such as law firms, accountants, human resource consultants, payroll processors, recruiters and credit card processors. But it is difficult if not impossible to outsource liability. Regulators in some industries, and an increasing number of courts in jurisdictions across the country, are holding companies liable for mistakes made by their vendors.
The banking industry in particular has had to deal with vendor liability issues, via regulations imposed by the FDIC and by Dodd-Frank, but it’s only a matter of time until similar standards apply outside banking and financial services.
FDIC Warns Banks About Risks of Marketplace Lending
By: Vincent M. Morrone and Ann Ustad Smith
On November 6, 2015, the Federal Deposit Insurance Company (FDIC) issued its Advisory on Effective Risk Management Practices for Purchased Loans and Purchased Loan Participations (FIL-49-2015) (FIL), which stressed the importance of banks implementing strong underwriting, effective due diligence and prudent credit risk management practices when purchasing and participating in loans, especially loans from nonbank third-party lenders, such as Prosper and Lending Club.
Illinois Supreme Court Explains Rule on “Picking Off” Plaintiffs in Class Actions
By: Michelle L. Dama, Carrie A. Hall and Tanya M. Salman
On October 22, 2015, in Ballard RN Center, Inc. v. Kohll’s Pharmacy & Homecare, Inc., 2015 IL 118644, the Illinois Supreme Court clarified mootness issues in class actions.
In April 2010, Ballard RN Center, Inc. (Ballard) sued Kohll’s Pharmacy & Homecare, Inc., (Kohll’s) for violations of the federal Telephone Consumer Protection Act (TCPA) for sending unsolicited fax advertisements. Ballard sought to represent a class of similarly-situated individuals and businesses that also received unsolicited fax advertisements from Kohll’s. Simultaneously with filing the lawsuit, Ballard filed a motion for class certification, stating it would file a supporting memorandum after obtaining discovery necessary to flesh out its satisfaction of the certification requirements.
The Third Circuit Follows FCC’s Suit and Expands Definition of “Autodialer"
By: Michelle L. Dama and Tanya M. Salman
On October 23, 2015, the Third Circuit of Appeals vacated a summary judgment decision in Yahoo, Inc.’s favor based on the Federal Communications Commission’s (FCC) July 10 Order that expanded the definition of an “autodialer” under the Telephone Consumer Protection Act (TCPA). Dominguez v. Yahoo, Inc., No. 14-1751, slip op. at 9 (3d Cir. Oct. 23, 2015).
Wisconsin District Court Continues Stay of TCPA Lawsuit
By: Michelle L. Dama and Tanya M. Salman
On October 20, 2015, Judge Randa from the U.S. District Court for the Eastern District of Wisconsin (The COUA) granted defendant Performant Technologies, Inc.’s (Performant) motion to continue a stay pending judicial review of the Federal Communications Commission’s (FCC) July 10 Declaratory Ruling and Order (Order) related to the Telephone Consumer Protection Act (TCPA). Gensel v. Performant Technologies, Inc., No. 13-C-1196 (E.D. Wis. Oct. 20, 2015).
SEC Finally Adopts Final Rules on Crowdfunding
By: Daniel J. Gawronski, Michael H. Altman and Paul A. Jones
On Friday, October 30, 2015, the U.S. Securities and Exchange Commission (SEC) finally adopted final rules for implementation of Title III of the JOBS Act, which allows companies to offer and sell its securities through the use of crowdfunding. The final rules are the culmination of a three-year process of proposed rules and delays.
Securities-based crowdfunding allows eligible startups and small businesses to raise capital by pooling small investments from multiple people around the country. Specifically, this type of crowdfunding seeks to alleviate the funding gap and accompanying regulatory concerns faced by startups and small businesses looking to raise capital in relatively low dollar amounts. The SEC has had to balance easing access to capital with its mission to protect investors and require adequate disclosure about a company’s operations. Therefore, although the JOBS Act seeks to make it easier for companies to raise capital, the final rules provide for certain restrictions and disclosures.