The Court of Appeals for the Ninth Circuit has ruled that the interest which could have accrued on $50 in convenience fees that a plaintiff paid when making payments on a debt and the time when the defendant refunded those fees after being threatened with a lawsuit is enough for the plaintiff to have standing to sue in federal court, affirming the lower court’s dismissal of the case.
The background: The plaintiff, a consumer who made mortgage payments through an online payment service, filed a class action lawsuit against the defendant, a loan servicer, alleging that the $5 convenience fee charged per payment violated multiple California consumer protection laws including the Rosenthal Fair Debt Collection Practices Act. After several months of paying these fees, the plaintiff sent a demand letter arguing that the charges were unlawful. In response, the defendant refunded the full $50 in fees and agreed to discontinue the charges moving forward.
- Despite receiving a full refund, the plaintiff proceeded with a class action lawsuit in California state court, asserting claims under the RFDCPA, California’s Unfair Competition Law, the Consumers Legal Remedies Act, and breach of contract.
- The defendant removed the case to federal court and successfully moved for dismissal, arguing that the refund negated any harm suffered by the plaintiff, thereby eliminating standing.
- The plaintiff appealed, arguing the case should have been remanded to state court rather than dismissed outright.
The ruling: The crux of the Ninth Circuit’s decision rested on whether the plaintiff suffered an “injury in fact” under Article III of the U.S. Constitution. While the defendant had refunded the $50 in fees, the court found that the plaintiff still suffered a financial injury due to the loss of the “time value” of money.
- The court cited prior rulings establishing that any temporary deprivation of funds — no matter how small — constitutes a tangible injury. As the Ninth Circuit noted:
“Every day that a sum of money is wrongfully withheld, its rightful owner loses the time value of the money.”
- This reasoning was enough for the court to determine that the plaintiff had standing to sue. Since there were no other jurisdictional barriers, the court ruled that the district court acted properly in dismissing the case rather than remanding it back to state court.
