Cook County Record

Friday, October 18, 2019

Judge: Class action can continue vs Wells Fargo, Fifth Third, Ironwood, others, over recorded calls

By Scott Holland | Apr 3, 2018

A federal judge has refused to dismiss a class action alleging telemarketers illegally recorded phone conversations among its banking clients’ business customers.

On Dec. 9, 2016, California residents James Wang, Sat Narayan, Kaeran Sudmalis-Testi, Ihab Ghannam and Blanca Saenz, filed suit in Chicago federal court against International Payment Services LLC, of Henderson, Nev., which does business as Elitepay Global, and Ironwood Financial, of Salt Lake City, which does business as Ironwood Payments.

Ironwood allegedly used a Naperville call center to solicit retailers and other merchants to persuade them to hire certain banks to process their debit and credit transactions. The plaintiffs are small business owners who allege surreptitious recording of phone conversations in which they divulged sensitive information. They also sued the companies that allegedly hired the marketing companies, including Wells Fargo, Fifth Third, First Data Corp., Vantiv Inc., and National Processing Company.

Jacie Zolna | Myron M. Cherry & Associates

The lawsuit accused the marketers of using “caller ID spoofing” and other tactics to allegedly mislead the business owners into believing they were speaking with either a local customer or an existing service provider, when the marketers were actually soliciting them to transfer their debit and credit card transaction processing business to a new bank and vendors.

In moving to dismiss, the defendants didn’t dispute the complaint met class action requirements, but rather that the plaintiffs lacked standing because they haven’t suffered an injury, citing in their argument the 2016 U.S. Supreme Court opinion in Spokeo Inc., v. Robins. U.S. District Judge Rebecca R. Pallmeyer addressed the motion in an opinion issued March 29 in Chicago, noting the plaintiffs sought “statutory damages without alleging actual economic loss.”

However, she said the complaint does sufficiently claim a violation of the right to privacy, particularly under a California law that prohibits “recording telephone communications without consent.”

Pallmeyer further explained the California Invasion of Privacy Act does not require plaintiffs to have suffered or be threatened with actual damages, and said “California District Courts that have interpreted CIPA in the wake of Spokeo have all held that CIPA violations constitute injuries in fact even without a showing of any actual harm beyond the invasion of the plaintiff’s right to privacy.”

However, Pallmeyer also noted she rejected the plaintiffs’ alternate theory regarding the defendants’ alleged “practice of storing the recordings in cloud-based computer systems accessible by the internet (which) created a risk of data breach,” saying the Supreme Court explicitly denied plaintiff standings on similar risks.

The defendants failed to convince Pallmeyer the plaintiffs aren’t entitled to CIPA protections as businesses. She also determined the plaintiffs plausibly alleged an expectation the conversations would be confidential, primarily because there was no indication the calls were being recorded, and said the defendants’ arguments about the type of phones used to make the calls were unmoving.

Individual defendants sought dismissal on grounds they weren’t subject to litigation based in Illinois, but Pallmeyer found the jurisdictional arguments unconvincing. She also said Ironwood owners Dewitt Lovelace and John Lewis failed to argue they lacked enough involvement in the alleged conduct to avoid liability, saying if they “truly ordered employees to secretly record calls placed to Californian businesses, then they are clearly liable when their employees did so.”

Pallmeyer also said the bank defendants failed in their motions to dismiss as they argued the claims they faced stemmed only from alleged receipt of recordings, whereas she determined the plaintiffs’ allegations were broader. And finally, she declined to issue sanctions the defendants requested against the plaintiffs’ attorneys — the firm of Myron M. Cherry & Associates, of Chicago, led by attorneys Myron Cherry and Jacie Zolna — because she concluded they were not, as the defendants’ alleged, relying only on the statements of one whistleblower to form the complaint.

The judge gave the defendants 21 days to file answers to her opinion.

Defendants are represented in the case by attorneys James R. Figliulo and Peter A. Silverman, and others of the firm of Figliulo & Silverman, of Chicago; Jess M. Krannich, of the firm of Manning Curtis Bradshaw & Bednar PLLC, of Salt Lake City; George James Tzanetopoulos, of the firm of Baker Hostetler, of Chicago; and attorneys with the firm of Polsinelli P.C., of Chicago.

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Organizations in this Story

Baker and Hostetler Fifth Third Bank Figliulo & Silverman First Data Corporation Myron M. Cherry & Associates, LLC Polsinelli PC U.S. District Court for the Northern District of Illinois Vantiv Inc Wells Fargo & Company