Latest 3 Cases: Dansko Holdings Inc. v. Benefit Trust Co. (Business Law), Klotz v. Celentano Stadtmauer and Wale LLP (Consumer Law), Moyer v. ...

How Not to Criticize the American Rescue Plan Act of 2021

MICHAEL C. DORF

Cornell law professor Michael C. Dorf responds to three broad-based objections by Republican opponents to the American Rescue Plan Act of 2021: (1) that the already-recovering economy doesn’t need stimulus; (2) that many of the Act’s provisions have nothing to do with COVID-19; and (3) that there will be waste, fraud, and abuse. Professor Dorf explains why these objections ring hollow and argues that while the Act is not perfect legislation and will likely face challenges in implementation, it is a much better option than anything Republicans were offering.

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Dansko Holdings Inc. v. Benefit Trust Co.

Docket: 19-3847

Opinion Date: March 16, 2021

Judge: Bibas

Areas of Law: Business Law, Contracts

Dansko conducted due diligence to replace the trustee for its employee stock ownership plan. Benefit falsely denied having been recently been investigated by the Department of Labor. Dansko’s board passed a resolution appointing Benefit as the new trustee under the Trust Agreement. Around that time, Dansko decided to refinance its debt. Benefit never agreed in writing to help with the refinance but allegedly said it would “be able to do the [deal]” and estimated that it would need a month or more to do due diligence for the trust. Dansko thought Benefit would be the trustee for the deal. In December 2014, Benefit told Dansko that it would not serve as trustee for the debt deal, which delayed the deal and allegedly cost Dansko more than $2 million in extra interest. Dansko sued Benefit, alleging breach of the trust agreement, breach of an implied promise (promissory estoppel), and that Benefit fraudulently induced Dansko to hire it by falsely denying the DOL investigation. Benefit counterclaimed for its defense costs under an indemnification clause in the trust agreement. The district court rejected Dansko’s claims but held that Dansko did not have to indemnify Benefit for its defense costs. Applying Pennsylvania law, the Third Circuit vacated. The court erred in rejecting Dansko’s contract, estoppel, and fraud claims but under the trust agreement, Dansko must advance the trustee’s reasonable litigation expenses.

Klotz v. Celentano Stadtmauer and Wale LLP

Docket: 19-3703

Opinion Date: March 16, 2021

Judge: Porter

Areas of Law: Consumer Law, Family Law

Klotz’s now-deceased husband received medical services from the Hospital and incurred a $1,580 debt; he left no estate. The Hospital retained CSW to collect the debt. CSW mailed collection letters to Klotz. Klotz claims she is not liable for the debt, arguing that the Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691, preempts New Jersey’s common-law doctrine of necessaries (where a spouse is jointly liable for necessary expenses incurred by the other spouse) and sued CSW for violating the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692e and 1692f. Preemption of the doctrine would allow Klotz to pursue her FDCPA case. The Third Circuit affirmed the dismissal of the case. The ECOA does not preempt New Jersey’s doctrine of necessaries. One ECOA regulation provides that “a creditor shall not require the signature of an applicant’s spouse . . . on any credit instrument if the applicant qualifies under the creditor’s standards of creditworthiness for the amount and terms of the credit requested.” Rejecting an argument that the doctrine effectively treats her as a spousal co-signer in violation of the spousal-signature prohibition, the court reasoned that Klotz’s medical debt falls within an exemption for incidental credit and rejected an argument that CSW failed to follow the procedural requirements of the doctrine of necessaries.

Moyer v. Patenaude & Felix A.P.C.

Docket: 20-1937

Opinion Date: March 16, 2021

Judge: Porter

Areas of Law: Consumer Law

Moyer failed to pay her credit-card debt. The card issuer hired Patenaude to collect it. Patenaude sent Moyer a one-page, single-sided collection letter that stated: If you wish to eliminate further collection action, please contact us at …. This is an attempt to collect a debt and any information obtained will be used for that purpose. Moyer sued Patenaude under the Fair Debt Collection Practices Act (FDCPA), arguing the letter’s second sentence, “to eliminate further collection action, please contact us," would deceive a debtor and lead a debtor to believe that a phone call is a “legally effective way to stop such collection action” when, in reality, only written communication can legally stop collection activity. Moyer claimed that the Contact Sentence would make a debtor uncertain about her right to dispute the debt in writing. The Third Circuit affirmed summary judgment in favor of Patenaude. The letter included statements that inform the consumer how to obtain verification of the debt and that she had 30 days in which to do so. Patenaude invited Moyer to call to “eliminate” collection action, but never asserted, explicitly or implicitly, that the phone call would, by law, force Patenaude to cease its collection efforts.