reliance can be presumed in NY from material misleadingness, as in California

Polvay v. FCTI, Inc., --- F.Supp.3d ----, 2024 WL 322050, No. 22-cv-4315 (JSR) (S.D.N.Y. Jan. 29, 2024)

The court certified a class of New York consumers who were assessed multiple fees for making balance inquiries at one of defendant FCTI’s ATMs at 7-Eleven stores. During the relevant period, all New York customers who used one of defendant’s ATMs saw the same initial prompt: “Would you like to view your account balance?” If they said yes, a balance inquiry fee would be assessed to the customer. And if the customer selected an account, a prompt would appear and ask the customer, “Would you like to print your Balance and continue the Transaction?” If they continued, this would be treated as a second balance inquiry and a second balance inquiry fee would be assessed, earning another interchange fee for FTCI; interchange fees are a major source of its revenue. The class alleged that “Continue/Cancel Prompt” screen was deceptive because it didn't reasonably appear to be a second balance inquiry, but defendant FCTI treated it as such. (Who thought this was ok?!) They brought claims under NYGBL Sections 349 and 350.

FTCI’s key argument was that causation must be determined on an individual, rather than class, basis. Instead, the court applied a presumption of reliance.

The court ruled based on three relevant principles used by the New York Court of Appeals: First, Sections 349 and 350 do not require proof of reliance. Second, causation is required. Third, there is a relationship between reliance and causation. This relationship, the court predicted, was best understood as allowing a presumption of reliance on a materially misleading statement at the class certification stage.

The New York Court of Appeals has explained that under Section 349, an allegation “that defendant’s material deception caused [plaintiffs] to suffer [a monetary] loss” is sufficient for purposes of causation; “[p]laintiffs need not additionally allege that they would not have otherwise entered into the transaction” (as would be required for showing reliance). Materiality is what satisfies the causation requirement, as in securities fraud cases and in California consumer protection cases.

Here, then, if a plaintiff could prove that (1) each class member was automatically shown the “Continue/Cancel Prompt” before pressing the “Continue” button and (2) that the “Continue/Cancel Prompt” was objectively material and misleading, then a presumption of reliance for purposes of showing causation would apply. Plaintiff showed (1) and there was enough to go to a jury on (2). Among other things, the Compliance Department at Pulse Network, an ATM Network, found that the “Continue/Cancel Prompt” screen violated its rules and that no “reasonable person would interpret this question to mean the cardholder is actually requesting a second Inquiry.”

FTCI didn’t rebut this presumption, merely speculating that some customers were aware that printing their account balance would result in a second balance inquiry fee based on agreements, disclosures, and account statements they received from their banks. But there was no evidence that these disclosures or agreements stated that printing an account balance would constitute a second balance inquiry. Moreover, evidence that certain customers incurred two balance inquiry fees on multiple occasions, was insufficient to show the “Continue/Cancel Prompt” screen had no effect on their decision to press “Continue.” It was just as plausible that they didn’t know or understand why they were charged twice.

I’m not going to run through the rest of the certification analysis, but a declaration from plaintiff’s expert stated that he could ascertain the members of the class and calculate damages using an algorithm and that the necessary transactional information to do so is in possession of defendant and the banks. He didn’t need to design the algorithm before certification; ascertainability is a “modest threshold requirement [that] will only preclude certification if a proposed class definition is indeterminate in some fundamental way.” Speculation that some third-party banks may refuse to turn over the necessary data wasn’t sufficient for finding lack of ascertainability.