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Kilgore v. KeyBank

California Class ActionUnited States District Court (N.D. Cal.)Case No. 3:08-cv-02958-TEH

Case Type:  Aiding and AbettingConsumer Rights

The Sturdevant Law Firm was co-counsel for plaintiffs in a class action on behalf of students of the failed Silver State Helicopters vocational school against KeyBank for predatory lending practices.  The complaint alleged KeyBank USA, N.A. violated California’s Unfair Competition Laws.  The lawsuit against KeyBank USA, N.A. and its affiliated entities sought to prohibit KeyBank from enforcing loans it made to California students who enrolled in Silver State, financed their tuition through KeyBank but had not completed their education when the school shut its doors without warning and filed for bankruptcy.  The suit, brought under California’s UDAP consumer protection law, alleged that KeyBank engaged in a pattern and practice of aiding and abetting vocational school fraud practices of the defunct helicopter school by intentionally omitting from its loan documents a notice (FTC Holder Rule) required by the Federal Trade Commission’s consumer protection regulations.  The lawsuit alleged KeyBank intentionally omitted the notice – and required Silver State to omit it from its contracts – so it could argue in court that it is not contractually bound by the FTC Holder Rule.  The lawsuit sought to end this unfair and deceptive practice in California.  The district court denied KeyBank’s motion to compel arbitration but dismissed the amended complaint because of federal preemption.  The Ninth Circuit issued an en banc decision reversing the district court denial of the motion to compel arbitration, holding that the injunction sought on behalf of a small class was not a “public injunction,” as discussed in Broughton v. Cigna Healthplans of Cal., 21 Cal. 4th 1066 (1999) and Cruz v. PacifiCare Health Systems, Inc., 30 Cal. 4th 1157 (2003), and therefore plaintiffs should each be required to pursue their claims individually in arbitration.  718 F.3d 1052 (9th Cir. 2013) (en banc).

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