Judge narrows privacy case against fintech firm Plaid
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(Reuters) – Plaid Inc must face some claims in a consolidated proposed class action that accuses the financial technology company of obtaining and using consumers’ banking account credentials and financial information without consent.
U.S. Magistrate Judge Donna Ryu in Oakland on Friday found the plaintiffs sufficiently allege invasion of privacy, violation of California’s anti-phishing law and other claims.
Ryu dismissed with prejudice the plaintiffs’ claims under the Stored Communications Act, the federal Computer Fraud and Abuse Act and its California equivalent, the Unfair Competition Law, and a claim for declaratory and injunctive relief.
“We appreciate the Court’s ruling, including the dismissal of a number of claims with prejudice, Michael Rhodes of Cooley, lead counsel for Plaid, said in a statement. “While certain other claims may go forward, this is based only on the literal allegations of the current complaint which we think are factually misguided and we look forward to challenging them on the merits as the case unfolds. Plaid is fully committed to user transparency and does not sell user data to third parties,” Rhodes said.
The plaintiffs are represented by lawyers at several firms, who in emailed comments said they are happy that the court allowed some claims to go forward. One of them, Rachel Geman of Lieff Cabraser Heimann & Bernstein, said the allegation that a fintech company is “pretending to be a trusted and secure bank,” is “a classic – and very concerning – violation of California’s Anti-Phishing Act.” Lawyers from Herrera Kennedy and Burns Charest also serve as interim lead counsel.
San Francisco-based Plaid said last month that it raised $425 million in a funding round. The investment values the company at $13.4 billion, Reuters reported at the time. In January, Visa Inc abandoned plans to acquire Plaid for $5.3 billion after the Justice Department sued to block the deal on antitrust grounds.
The litigation consolidated in Oakland is made up of five proposed class actions filed last year against Plaid, which provides a platform for users to connect their bank accounts to payment apps.
The plaintiffs say they signed up for fintech apps including Venmo and Square’s Cash App and linked their bank accounts, and were not aware of Plaid’s role or that the company would collect banking information.
Plaid has “exploited its position as middleman,” the plaintiffs alleged. They claim Plaid deceptively uses bank logos and color schemes during the login process and gets bank account credentials from users of these apps, all in a way that “defies industry norms and consumers’ reasonable expectations.” The company then uses the login credentials to collect and sell consumers’ financial data, they allege.
The plaintiffs brought some claims on behalf of a nationwide class and others on behalf of a California class.
Plaid moved to dismiss the consolidated action, arguing that the plaintiffs lack standing, some claims are time-barred, and they fail to state a claim, among other defenses.
The judge on Friday found the plaintiffs adequately alleged they linked their bank accounts to the fintech apps using Plaid. She also concluded that the allegations established standing and rejected with Plaid’s timeliness argument.
Ryu analyzed each of the 10 claims in the complaint, ultimately finding that the plaintiffs state a claim for invasion of privacy, right to privacy under California’s Constitution, the state’s anti-phishing law, sections of the state’s civil code and unjust enrichment.
The case is In Re Plaid Inc Privacy Litigation, U.S. District Court for the Northern District of California, No. 4:20-cv-03056
For the plaintiffs: Christopher Cormier of Burns Charest; Rachel Geman of Lieff Cabraser Heimann & Bernstein; Shawn Kennedy of Herrera Kennedy
For Plaid: Michael Rhodes of Cooley