Maryland – eNotes: Liability – April 2025

SIGNIFICANT CASE SUMMARIES

Maryland Case Summaries

Johnson, et al. v. Cont’l Fin. Co.
United States Court of Appeals for the Fourth Circuit
No. 23-2047, Dec. Term, 2024

Decided: March 11, 2025

A claim that a contract is illusory calls into question the existence of the contract, and it is on the Court to determine the validity of an agreement to arbitrate.

Background

Continental Finance Company, LLC, and its wholly owned subsidiary Continental Purchasing, LLC (“Defendants”), are high-interest lenders that market and service credit card accounts for individuals with poor credit. Tiffany Johnson and Tracy Crider (“Plaintiffs”) obtained credit cards marketed and serviced by the Defendants. Plaintiffs filed separate class-action lawsuits against Defendants in Maryland State Court. Plaintiffs’ Complaints alleged that Defendants had engaged in widespread violations of Maryland usury laws by extending credit without a license and charging interest rates far above statutory limits. Plaintiffs alleged that Defendants had operated a “rent-a-bank” scheme, where a high-interest lender channels its loans through a federally chartered bank to take advantage of the bank’s exemption from state usury laws.

Defendants removed both cases to the District of Maryland and filed Motions to compel arbitration. Defendants argued that when Plaintiffs accepted their credit cards, they agreed to the cardholder agreement which includes an arbitration provision. Plaintiffs opposed the Motions, arguing that the cardholder agreements lacked consideration and were never formed due to a “change-in-terms” clause allowing Defendants to unilaterally alter any term in the agreement at its “sole discretion.” It was argued that this clause rendered the contract illusory. The District Court denied the Defendants’ Motions to compel arbitration and consolidated the cases. The District Court held that the Court should determine whether the parties formed an agreement to arbitrate and that the cardholder agreement was illusory under Maryland law. Defendants appealed.

Holding

The United States Court of Appeals for the Fourth Circuit affirmed the District Court’s determination that the threshold issue of contract formation is for the Court, not an arbitrator. The Fourth Circuit applied Maryland law on determining the initial question of contract formation. he Court does not resort to any contractual choice-of-law provisions. The Fourth Circuit held that the change-in-terms clause, under Maryland law, was so one-sided and vague as it allows a party to escape all its contractual obligations at will. The change-in-terms clause deprived the cardholder agreement of the minimum reciprocity needed to form a contract in Maryland. The Fourth Circuit affirmed the District Court’s judgment.

Questions about this case can be directed to Lucas Duty at (443) 641-0572 or lduty@tthlaw.com.

Opiotennione v. Bozzuto Mgmt. Co.
United State Court of Appeals for the Fourth Circuit
No. 21-1919

Decided: March 4, 2025

A hypothetical and speculative injury is insufficient to establish the injury-in-fact element of standing to bring suit in Federal Court.

Background

Plaintiff Neuhtah Opiotennione, age 55, was in search of a new residence. From 2018 to 2019, Plaintiff viewed various rental apartment advertisements on her Facebook “News Feed.” None of the places advertised were suitable for her. She ultimately purchased a house. However, after purchase, Plaintiff became aware of the logistics behind advertising practices on Facebook. Specifically, property management companies contracted with Facebook to run in-app advertisements for their apartment buildings. The target audience for these ads included, inter alia, users who were 50 years old or younger. Based on this element, and others, Facebook implemented an algorithm to display a series of advertisements tailored to each user. In this case, since Plaintiff was outside the age range of targeted users, she did not receive the advertisements about apartment rentals. Plaintiff subsequently sued the various property management companies claiming the companies discriminated against her based on her age.

The U. S. District Court for the District of Maryland dismissed Plaintiff’s case because she lacked standing to sue. The District Court held that to establish standing, a plaintiff must prove that she “(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Defendants argued that the standing analysis need not venture past the first element, injury in fact, because Plaintiff failed to establish a concrete and particularized injury. Specifically, Plaintiff failed to prove that simply being outside of the targeted age range created a personal, cognizable injury. The District Court agreed and ultimately dismissed Plaintiff’s case. Plaintiff appealed.

Holding

The Court of Appeals for the Fourth Circuit affirmed the District Court’s decision, holding that the injury in fact element of the standing rule requires a concrete and particularized injury (i.e., a real, not abstract, injury that affects the plaintiff in a personal and individual way). Simply put, the injury must be “personal, individual, distinct, and differentiated.” Here, Plaintiff claimed that Defendants discriminated against all people over age 50 when they targeted their ads to a younger group of Facebook users. The Court found this claim to be the exact opposite of the personal, individual, distinct, and differentiated injury required for standing. As a result, the Court held that nothing connected Plaintiff personally to Defendants’ alleged discrimination as to set her apart from all other Facebook users over age 50. Therefore, because Plaintiff did not meet her burden of proving and injury in fact that is concrete and particularized, she lacked standing.

Questions about this case can be directed to Alex Mitchell at (443) 641-0563 or amitchell@tthlaw.com.