L.S. v. Webloyalty, Inc., No. 18-3639 (2d Cir. 2020)
Annotate this Case
Justia Opinion Summary
Want to stay in the know about new opinions from the Second Circuit US Court of Appeals?
Sign up for free summaries delivered directly to your inbox. Learn More ›
You already receive new opinion summaries from Second Circuit US Court of Appeals. Did you know we offer summary newsletters for even more practice areas and jurisdictions? Explore them here.
Plaintiff filed a putative class action under the Electronic Funds Transfer Act (EFTA), alleging that defendant failed to provide plaintiff with a copy of the written authorization he gave online for recurring monthly charges to his debit card.
The Second Circuit affirmed in part, holding that Webloyalty satisfied its obligation under the EFTA by providing plaintiff with an email containing the relevant terms and conditions of that authorization. In this case, the EFTA did not require Webloyalty to provide plaintiff with a duplicate of the webpage on which he provided authorization for recurring fund transfers, and Webloyalty's email to plaintiff was sufficient. However, the court held on a separate claim arising under the Connecticut Unfair Trade Practices Act, that the district court erroneously dismissed the claim for lack of subject matter jurisdiction. The court considered plaintiff's remaining arguments and concluded that they were meritless. The court vacated in part and remanded for further proceedings.
Download PDF
18 3639 L.S. v. Webloyalty, Inc., GameStop Corporation United States Court of Appeals for the Second Circuit 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Before: JACOBS, CARNEY, PARK, Circuit Judges. In this putative consumer class action, plaintiff L.S. appeals from the 27 dismissal on summary judgment of his claim under the Electronic Funds 28 Transfer Act (“EFTA”) alleging that defendant Webloyalty.com, Inc. AUGUST TERM 2019 No. 18 3639 L.S., Appellant, v. WEBLOYALTY.COM, INC., GAMESTOP CORPORATION, Defendants Appellees, AMAZON.COM, INC., VISA INC., Defendants. ARGUED: DECEMBER 2, 2019 DECIDED: MARCH 20, 2020 1 1 (“Webloyalty”) failed to provide L.S. with a copy of the written authorization he 2 gave online for recurring monthly charges to his debit card. We agree with the 3 district court that Webloyalty satisfied its obligation under EFTA by providing 4 L.S. with an email containing the relevant terms and conditions of that 5 authorization. On a separate claim arising under state law, the district court 6 erroneously dismissed the claim for lack of subject matter jurisdiction. 7 Therefore, we AFFIRM in part and in part VACATE and REMAND. 8 ____________________ 9 10 11 12 13 14 15 16 17 18 DAVID C. KATZ, WeissLaw LLP, New York, NY, for Plaintiff Appellant L.S. MARK C. FLEMING, (John J. Butts, Timothy J. Perla, Jessica R. Lisak, Paloma Naderi, on the brief), Wilmer Cutler Pickering Hale and Dorr LLP, for Defendants Appellees Webloyalty.com, Inc. and GameStop Corporation. DENNIS JACOBS, Circuit Judge: In this putative consumer class action, plaintiff L.S. appeals from a grant of 19 20 summary judgment in the District Court for the District of Connecticut (Haight, 21 J.) dismissing claims against Webloyalty.com, Inc. (“Webloyalty”) and Gamestop 22 Corporation (“Gamestop,” and together with Webloyalty, “Defendants”) under 2 1 the Connecticut Unfair Trade Practices Act (“CUTPA”) and the Electronic Funds 2 Transfer Act (“EFTA”). The parties agree that the district court improperly 3 dismissed L.S.’s CUTPA claims for lack of subject matter jurisdiction. Therefore, 4 the only contested issue is whether the district court properly granted summary 5 judgment on L.S.’s EFTA claim against Webloyalty. L.S. contends that Webloyalty failed to provide him with a “copy” of his 6 7 authorization of recurring monthly charges to his bank account in violation of 15 8 U.S.C. § 1693e(a). Webloyalty argues that it satisfied EFTA’s “copy of such 9 authorization” requirement by sending a confirmation email containing the 10 material terms and conditions of the authorized electronic fund transfers. 11 Because we agree with the district court that L.S.’s cramped interpretation of 12 EFTA is inconsistent with the common sense meaning, context, and statutory 13 purpose of the “copy” requirement, we hold that: (1) EFTA did not require 14 Webloyalty to provide L.S. with a duplicate of the webpage on which he provided 15 authorization for recurring fund transfers; and (2) Webloyalty’s email to L.S. was 16 sufficient. Accordingly, we AFFIRM the district court’s grant of summary judgment 17 18 in favor of Webloyalty on L.S.’s EFTA claim. Because the district court 3 1 improperly dismissed L.S.’s CUTPA claims against Defendants for lack of subject 2 matter jurisdiction, we VACATE the judgment of dismissal, and REMAND for 3 further proceedings. BACKGROUND 4 This is L.S.’s second appeal in this case. See L.S. v. Webloyalty.com, Inc., 5 6 673 F. App’x 100 (2d Cir. 2016) (“Webloyalty I”). Our prior summary order 7 included a summary of the essential facts underlying L.S.’s putative consumer 8 class action and we reproduce that text here (lightly revised): The case turns on a single transaction in which L.S., a minor, was allegedly deceived into enrolling in a fee based monthly discount club operated by Webloyalty. In late 2009, he purchased a video game from the website GameStop.com. In the course of executing his purchase, L.S. alleges that he unwittingly registered for Webloyalty’s “Shopper Discounts” program by entering his personal information on a webpage integrated into the GameStop check out process. The Webloyalty enrollment page (the “Enrollment Page”) advertised a $20 GameStop coupon, included references to GameStop throughout its description of Webloyalty’s membership program, and required him to enter the last four digits of his debit card number and to enter and verify his email address. He apparently did so, and GameStop thereafter transferred appellant’s full billing information on to Webloyalty. After a thirty day “free trial” period elapsed, Webloyalty debited the first of what would be several $12 monthly membership fees from appellant’s account. “Shopper Discounts” was noted as the payee. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 4 These debits continued through August 2010, when appellant filed this suit. 1 2 3 4 Webloyalty I, 673 F. App’x at 103. L.S.’s lawsuit alleged: (1) fraud (against 5 Webloyalty and Gamestop); (2) unfair or deceptive trade practices in violation of 6 CUTPA (against Webloyalty, Gamestop and Visa); and (3) violations of EFTA 7 (against Webloyalty and Visa). Id. 8 Defendants moved to dismiss all claims against them, and the district 9 court granted the motion in full. On appeal, this Court affirmed the dismissal of 10 L.S.’s fraud claims but remanded in part for further proceedings on certain 11 CUTPA and EFTA claims. Id. at 107. L.S.’s complaint had alleged two EFTA 12 claims against Webloyalty, which were treated differently. We ruled that the 13 EFTA claim alleging that Webloyalty received unauthorized electronic fund 14 transfers in violation of 15 U.S.C. § 1693e(a) was properly dismissed because L.S. 15 “clearly gave written authorization” for the fund transfers when he digitally 16 entered his personal information, including his name and four digits of his debit 17 card number, on the Enrollment Page. Id. at 106. However, with respect to the EFTA claim alleging that Webloyalty failed 18 19 to provide him with a “copy of such authorization,” we ruled that the district 5 1 court improperly rested its decision on evidence outside the scope of L.S.’s 2 complaint: In defending against appellant’s EFTA copy requirement claim, [Defendants] introduced an email describing the benefits of Webloyalty membership and including, in a footer, details about the debits they argued that [L.S.] had authorized. However, this email was not referenced in [L.S.’s] complaint, not relied on in the course of the complaint’s allegations, and [L.S.] contends that he never saw it. To the extent that the district court relied on the affidavits submitted by Webloyalty employees authenticating the email to justify a ruling on the email’s legal effect, this was a determination properly made on summary judgment, not in response to a motion to dismiss. DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010). . . . The fact that the district court had already allowed some discovery here does not change this analysis. To the contrary, if, in the district court’s assessment, discovery on the relevant claims was properly closed, it could have exercised its authority to convert and then evaluated whether Webloyalty’s email sufficed to meet with its statutory obligations in light of all the undisputed facts. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Webloyalty I, 673 F. App’x at 107. Accordingly, we remanded L.S.’s “copy” 24 claim under EFTA along with his CUTPA claim alleging that Webloyalty and 25 Gamestop engaged in deceptive trade practices. Id. 26 On remand, Webloyalty moved for summary judgment on the remaining 27 EFTA claim. In granting summary judgment, the district court concluded that: 28 (1) the email produced by Webloyalty, which contained the details of the 6 1 recurring payments authorized by L.S. (the “Join Email”) was authentic, L.S. v. 2 Webloyalty.com, Inc., 2018 WL 5314913, at *4 (D. Conn. Oct. 26, 2018); (2) there 3 was no genuine dispute of fact that L.S. received the Join Email, id. at *4 5; and 4 (3) the Join Email satisfied Webloyalty’s obligation under EFTA, which requires 5 “not an exact reproduction of the entire authorization page . . . but rather, a 6 contemporaneous copy of the terms and conditions of a preauthorized electronic 7 fund transfer [L.S.] has authorized from his account,” id. at *7 (internal quotation 8 marks omitted). Finally, the district court dismissed L.S.’s CUTPA claims 9 against Defendants without prejudice for lack of subject matter jurisdiction, 10 holding that because CUTPA was a state statute, the court “c[ould] only rule on 11 the CUTPA claim if it chooses to exercise supplemental jurisdiction,” which it 12 declined to in this case. Id. at *8 9. L.S. timely appealed. 13 DISCUSSION 14 “We review questions of statutory interpretation de novo.” Roach v. 15 Morse, 440 F.3d 53, 56 (2d Cir. 2006). Likewise, we review de novo the district 16 court’s decision to grant summary judgment on L.S.’s EFTA claim. Estate of 17 Gustafson v. Target Corp., 819 F.3d 673, 675 (2d Cir. 2016). 18 7 1 I 2 Satisfaction (or not) of the “copy of such authorization” requirement turns 3 on a question of statutory interpretation. EFTA provides (in relevant part) that 4 “[a] preauthorized fund transfer from a consumer’s account may be authorized 5 by the consumer only in writing, and a copy of such authorization shall be 6 provided to the consumer when made.” 15 U.S.C. § 1693e(a). L.S. contends 7 that Webloyalty failed to satisfy § 1693e(a) because it did not provide L.S. with a 8 duplicate or facsimile of the Enrollment Page on which he authorized recurring 9 payments. Defendants argue that a copy of the material terms of the 10 authorization in the form of the Join Email was sufficient.1 The interpretation 11 of EFTA’s “copy of such authorization” requirement is a matter of first 12 impression in this circuit; no other circuit has considered it. The parties propose dueling dictionary definitions of “copy”: either 13 14 one for one, as L.S. contends (“an imitation, transcript, or reproduction of an 15 original work,” Webster’s Third New International Dictionary (2002)); or closely Webloyalty argues that it also satisfied the copy requirement by immediately redirecting L.S. to a webpage containing similar payment details (the “Acknowledgment Page”) upon enrollment. Because we conclude that the Join Email was sufficient to satisfy Webloyalty’s obligation under EFTA, we omit further discussion of the Acknowledgment Page. 1 8 1 similar, as Defendants contend (“[a] thing made to be similar or identical to 2 another,” Oxford American Desk Dictionary & Thesaurus (3rd ed. 2010)). 3 Although the dictionaries are not dispositive, there seems to be substantial 4 support for the definition of “copy” as “an imitation” or “reproduction of an 5 original.” Black’s Law Dictionary (5th ed. 1979); The American Heritage 6 Dictionary of the English Language (4th ed. 2000) (same); see also Webster’s New 7 World Dictionary (3d College ed. 1988) (explaining that copy “refers to any 8 imitation, often only approximate, of an original”). Of course, it is a “cardinal 9 rule” of statutory construction that “statutory language must be read in context 10 since a phrase gathers meaning from the words around it.” United States v. 11 Watkins, 940 F.3d 152, 165 66 (2d Cir. 2019). Here, “copy” does not appear in 12 isolation, but as part of the phrase “copy of such authorization.” 15 U.S.C. § 13 1693e(a). Therefore, to determine what disclosure EFTA required Webloyalty to 14 provide, we should also consider the scope of L.S.’s “authorization.” “Authorization” is “an instance” of “formal permission or approval” or 15 16 “the action of making legally valid.” The Oxford English Dictionary (3d ed. 17 2014). This narrows the scope of what needs to be “copied” to the text of the 18 Enrollment Page that effected the authorization. Because the vast majority of 9 1 the Enrollment Page is comprised of extraneous marketing verbiage unrelated to 2 the electronic fund transfer authorization, “copy of such authorization” cannot 3 reasonably be read to encompass the entire Enrollment Page, as L.S. suggests. 4 Instead, the transfer authorization itself was effected by L.S.’s inclusion of the 5 last four digits of a credit/debit card on the Enrollment Page next to the terms of 6 the recurring transfers from that account. See supra at 5. This interpretation is 7 bolstered by the fact that it is consistent with the way “authorization” is used 8 elsewhere in EFTA. See Pereira v. Sessions, 138 S. Ct. 2105, 2115 (2018) (“[I]t is a 9 normal rule of statutory construction that identical words used in different parts 10 of the same act are intended to have the same meaning.”). For example, 15 11 U.S.C. § 1693a(12)(A) although in the context of describing “unauthorized” 12 transfers suggests that an authorization is accomplished by the consumer s 13 furnishing of “the card, code, or other means of access to [the] consumer s 14 account . . . .” Moreover, “we must (as usual) interpret the relevant words not in a 15 16 vacuum, but with reference to the statutory context, ‘structure, history, and 17 purpose.’” Abramski v. United States, 573 U.S. 169, 179 (2014) (quoting 18 Maracich v. Spears, 570 U.S. 48, 76 (2013)). When Congress enacted EFTA in 10 1 1978, it announced (in an introductory subsection titled “Congressional findings 2 and declaration of purpose”) that its primary purpose was to protect consumers 3 in the then novel context of electronic payment systems: 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 The Congress finds that the use of electronic systems to transfer funds provides the potential for substantial benefits to consumers. However, due to the unique characteristics of such systems, the application of existing consumer protection legislation is unclear, leaving the rights and liabilities of consumers, financial institutions, and intermediaries in electronic fund transfers undefined. ... It is the purpose of this [statute] to provide a basic framework establishing the rights, liabilities, and responsibilities of participants in electronic fund and remittance transfer systems. The primary objective of this subchapter, however, is the provision of individual consumer rights. 15 U.S.C. § 1693. EFTA’s stated purpose of consumer protection would be served whether 20 21 the term “copy of such authorization” is read to mean a duplicate or a summary 22 of material terms. But the former deviates from common usage in the consumer 23 context. For instance, a customer who pays by credit or debit card at a 24 brick and mortar shop may be asked to sign a receipt, and receive a “copy” that 11 1 differs, in appearance and substance, from the signed version: it may be marked 2 “Customer Copy,” lack the customer’s signature, or omit itemized charges. Moreover, as agencies responsible for applying EFTA in the consumer 3 4 context have discovered, a narrow reading of the “copy of such authorization” 5 requirement will yield some untenable results. For instance, the Consumer 6 Financial Protection Bureau (the “CFPB”) has suggested that the written 7 authorization required by EFTA may be given orally over the phone pursuant to 8 the E SIGN Act, 15 U.S.C. § 7001 et seq; and that a payee can comply with the 9 “copy” requirement by providing the customer with a “copy of the terms of the 10 authorization . . . in paper form or electronically.” Compliance Bulletin 2015 06, 11 Requirements for Consumer Authorizations for Preauthorized Electronic Fund 12 Transfers, 2015 WL 10372389 (Nov. 23, 2015) (“CFPB Bulletin Six”) (emphasis 13 added).2 By contrast, giving the consumer a duplicate of the oral authorization 14 (e.g., in the form of an audio recording, or a transcription of the telephone 15 conversation) would burden the payee without any corresponding benefit to the 16 consumer. Here, L.S. purportedly received a notice containing the material The CFPB has rulemaking authority to interpret and implement EFTA pursuant to the Dodd Frank Act of 2010, which transferred rulemaking authority from the Federal Reserve. 2 12 1 terms and conditions of the payment authorization; a duplicate of the Enrollment 2 Page which contained text and graphics unrelated to the authorization would 3 have afforded him no incremental protection. Finally, L.S. has offered no convincing argument that his narrow reading 4 5 conforms more closely to the plain meaning or stated purpose of the statute. 6 On the contrary, it conflicts with the CFPB’s Official Interpretations of Regulation 7 E, which implements EFTA’s “copy” requirement: “[t]he person that obtains the 8 [payment] authorization must provide a copy of the terms of the authorization to 9 the consumer either electronically or in paper form.” 12 C.F.R. Pt. 205, supp. I, § 10 10(b), cmt. 5 (emphasis added). Accordingly, we affirm the district court’s holding that EFTA’s copy 11 12 requirement may be satisfied by providing the consumer with an email 13 containing the terms of the preauthorized electronic fund transfer he has 14 authorized from his account. II L.S. argues that even if we accept Defendants’ interpretation of EFTA’s 15 16 17 18 “copy” requirement, the district court erred in holding that Webloyalty satisfied 19 the requirement. Principally, L.S. argues that: (1) the district court failed to 13 1 permit adequate discovery concerning the Join Email; and (2) the Join Email was 2 intentionally confusing. These arguments are without merit. 3 L.S. argues that further discovery concerning Webloyalty’s automated 4 enrollment system might have disclosed unspecified “errors” that interfered with 5 L.S.’s receipt of the terms of his payment authorization. But a party seeking 6 further discovery “must show that the material sought is germane to the defense, 7 and that it is neither cumulative nor speculative, and a bare assertion that the 8 evidence supporting a plaintiff’s allegation is in the hands of the defendant is 9 insufficient.” Alphonse Hotel Corp. v. Tran, 828 F.3d 146, 151 (2d Cir. 2016). 10 We review the district court’s decision to forgo further discovery for abuse of 11 discretion. Id. The district court relied on Defendants’ uncontroverted testimony 12 13 concerning the automated enrollment system that generated the Join Email, and 14 considered the only specific potential failure identified by L.S.: that it did not 15 populate the Acknowledgment Page with L.S.’s personal information. As the 16 district court concluded, this was irrelevant to Webloyalty’s fulfillment of its 17 obligations under EFTA. Webloyalty, 2018 WL 5314913, at *4. Having 18 determined that Webloyalty’s testimony was credible, the district court 14 1 reasonably concluded that the possibility that there were more potential errors, 2 or that there was deliberate interference with the automated system, was too 3 speculative to justify further discovery. Id. Second, L.S. contends that the Join Email was too confusing to pass muster 4 5 under EFTA, because the details of L.S.’s payment authorization were at the 6 bottom of a spam like email beneath prominent graphics advertising 7 Webloyalty’s special offers and customer rewards. These considerations may 8 well be relevant to L.S.’s CUTPA claim alleging deceptive trade practices; and we 9 do not rule out the possibility that a customer notification designed to obscure or 10 omit payment details might violate EFTA’s copy requirement. But the Join 11 Email included “Billing Details” in its subject line, and (under a header reading 12 “OFFER AND BILLING DETAILS – CONFIRMATION FOR YOUR RECORDS”) 13 revealed all the material terms of the fund transfers authorized by L.S., including 14 the end date of L.S.’s trial period, at which point charges would begin to accrue; 15 the card being charged; and the monthly interval of the recurring charges. 16 App’x at 791. Therefore, we agree with the district court that Webloyalty 17 satisfied its obligation under EFTA by sending L.S. the Join Email, a 18 “contemporaneous communication[] [that] fully revealed the terms, conditions, 15 1 and monthly debit card charges under the program in question.” Webloyalty, 2 2018 WL 5314913, at *5. III 3 We agree with the parties that it was error to dismiss L.S.’s CUTPA claim 4 5 for lack of subject matter jurisdiction. The district court held that after granting 6 summary judgment on L.S.’s (federal) EFTA claims, it “c[ould] only rule on the 7 CUTPA claim if it chooses to exercise supplemental jurisdiction.” Webloyalty, 8 2018 WL 5314913, at *8. However, L.S.’s complaint adequately pled an 9 alternative basis for jurisdiction: under the Class Action Fairness Act (“CAFA”), 10 federal district courts are generally invested with original jurisdiction over 11 putative class actions alleging damages exceeding $5 million and a class of more 12 than 100 persons, in which any member plaintiff class is a citizen of a State 13 different from any defendant. See 28 U.S.C. § 1332(d); App’x at 24 (¶ 7), 285 14 (¶ 19). See also Gale v. Chicago Title Ins. Co., 929 F.3d 74, 78 (2d Cir. 2019) 15 (emphasizing that courts must look to the allegations in the operative complaint 16 to determine CAFA jurisdiction). The district court apparently rejected the application of CAFA jurisdiction 17 18 on the basis that there “may be a conflict emanating from CUTPA’s class action 16 1 limitations if this claim were to remain in federal court.” Webloyalty, 2018 WL 2 5314913, at *9. But aside from certain statutory exceptions that do not apply in 3 this case, subject matter jurisdiction under CAFA is not discretionary, see 28 4 U.S.C. § 1332(d)(3) (4); and the likelihood of class certification or success on the 5 merits had no bearing on the district court’s jurisdiction over L.S.’s putative 6 CUTPA class action claim in the first instance. Therefore, we agree with the 7 parties that the dismissal of L.S.’s CUTPA claim should be vacated, and the case 8 remanded to the district court for further proceedings. * * * L.S. requests that this case be assigned to a different judge on remand. 9 10 11 12 Reassignment is justified only in “unusual circumstances.” Martens v. 13 Thomann, 273 F.3d 159, 174 (2d Cir. 2001). In reviewing a request for 14 reassignment, we consider the following factors: (1) whether the judge is likely to 15 have “substantial difficulty” putting out of mind “previously expressed views or 16 findings determined to be erroneous”; (2) whether reassignment is “advisable to 17 preserve the appearance of justice”; and (3) whether it would create “waste and 18 duplication out of proportion to any gain in preserving the appearance of 19 fairness.” United States v. Robin, 553 F.2d 8, 10 (2d Cir. 1977) (per curiam). 17 L.S. expresses a fear the district court “cannot be expected to put its 1 2 previously expressed opinions out of mind while further presiding over this 3 case.” Appellant’s Br. at 52. However, nothing substantiates this concern; the 4 fact that the district court ruled against L.S. for a second time on remand is 5 insufficient alone to call into question Judge Haight’s impartiality or jeopardize 6 the appearance of justice. See Federal Ins. Co. v. United States, 882 F.3d 348, 373 7 (2d Cir. 2018). Accordingly, we decline to reassign this case to a new judge on 8 remand. 9 CONCLUSION We have considered L.S.’s remaining arguments and conclude that they 10 11 are meritless. For the reasons stated above, the district court’s grant of 12 summary judgment on L.S.’s EFTA claim is AFFIRMED. The district court’s 13 judgment dismissing L.S.’s CUTPA claims against Webloyalty and Gamestop is 14 VACATED and the case is REMANDED for further proceedings. 18
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
