August 5, 2021

Consumer finance cases headed to Supreme Court could impact auto finance

The U.S. Supreme Court is in session, and the lawyers at Hudson Cook are keeping an eye on a few upcoming legal cases that could cause ripples in the auto finance and retail sectors. Here are three cases before the court they feel could have far-reaching implications:

Facebook Inc. v. Duguid: Noah Duguid alleges that he never used Facebook, but the social media company sent him numerous text messages about issues with his account. Even though Facebook did not generate random sequential numbers in order to contact Duguid, the Ninth Circuit determined the texts fall under the automatic telephone dialing system category under the Telephone Consumer Protection Act.

The Telephone Consumer Protection Act, passed by Congress in 1991, prohibits robocalls without the receiving party’s consent, unless “such calls are necessary in an emergency situation affecting the health and safety of the consumer.” Auto lenders have struggled with TCPA violations in recent years. Last year, Nissan Motor Acceptance Corp. agreed to pay $2.2 million to settle a class-action lawsuit accusing the lender of violating the TCPA. If the court narrows the definition of auto dialer technology, it could benefit lenders.

AMG Capital Management, LLC v. FTC: In this case between an asset management company and the Federal Trade Commission, the degree to which the federal agency punishes companies for false or misleading advertising is at stake, according to Allen Denson, a partner at Hudson Cook. The FTC’s governing statute references “injunctions and restraining orders” with respect to false advertising cases, but the FTC frequently seeks restitution in these cases, particularly with auto dealers.

“There’s increasingly been a push for the FTC to get money from those false advertising cases, most frequently, disgorgement of profits from the deceptive advertising,” Denson said.

The issue is limited to false advertising enforcement, Hudson Cook partner Mark Rooney wrote in an October article, and would not affect the FTC’s ability to seek monetary redress for unfair or deceptive acts or practices.

Henry Schein Inc. v. Archer and White Sales Inc.: This case between two dental equipment distributors could determine which party has a right to determine if a dispute goes to trial or through arbitration. Its verdict could significantly impact how consumer arbitration clauses are enforced, Rooney said.

This is the second time this case has made it to the Supreme Court. In Justice Brett Kavanaugh’s first opinion in early 2019, the court held that, under the Federal Arbitration Act, courts must enforce agreements to delegate questions of arbitrability to an arbitrator, according to Rooney. This time, the court will determine how a carve-out provision could influence where litigation is settled.

For auto lenders, diminishing the FAA could open the gate for more consumer disputes heading to court rather than arbitration. Lenders prefer arbitration over in-court proceedings, Denson said, because “it’s a lot less expensive, more efficient and less public.”

Oral arguments for the Schein case and the Facebook case are scheduled for December 8. Arguments for the AMG case have not been scheduled.