September 5, 2014—Tycko & Zavareei has scored a significant appellate victory on behalf of the membership of the American Psychological Association (“APA”). On September 5, 2014, the United States Court of Appeals for the D.C. Circuit reversed the trial court’s dismissal of a class action complaint alleging improper dues-charging practices by the APA, in Levine et al. v. American Psychological Association and American Psychological Association Practice Organization. The decision was authored by Circuit Judge Sri Srinivasan on behalf of a unanimous panel that also included Circuit Judges Judith Rogers and Thomas Griffith.
In their class action complaint, members of the APA—represented by Tycko & Zavareei—alleged that the APA falsely represented to its members (on its annual dues statements and elsewhere) that they were required to pay an annual “practice assessment” for continued APA membership. According to the lawsuit, payment of the assessment was not, in fact, a condition of APA membership. Rather, the APA funneled these funds to its lobbying arm: the American Psychological Association Practice Organization (“APAPO”). The plaintiffs asserted that the APA did this because it did not believe that its members would voluntarily donate sufficient funds to the APAPO to support its lobbying activities; however, it could not mandate payment of funds for lobbying purposes as a condition of membership without jeopardizing its tax-exempt status as a 501(c)(3) charitable organization under the Internal Revenue Code. Thus, the APA allegedly tried to have it both ways: by falsely representing in its communications to its members that payment of the practice assessment was a condition of APA membership to obtain funding for the APAPO, but not making payment of the assessment an official membership requirement to avoid potentially losing its federal tax-exempt status.
The D.C. Circuit disagreed with the trial court’s conclusion that the plaintiffs failed to state viable legal claims. Namely, the court reversed the dismissal of claims against the APA for unjust enrichment and also disagreed with the trial court’s conclusion that the plaintiffs could not amend their complaint to state a claim for fraudulent inducement on the grounds that any amendment could be futile. Finally, the D.C. Circuit held that the plaintiffs were free to move for leave to amend their complaint to add a cause of action for negligent misrepresentation.
In its decision, the D.C. Circuit held that plaintiffs adequately alleged that the APA “included misleading language on the dues statement in order to deceive plaintiffs into overpaying for APA membership.” In assessing the case, the court observed that “the dues statement contained several indications that payment of the special assessment was a requirement of APA membership.” The court also observed that in light of plaintiffs’ allegations that the APA website did not allow payment of dues without payment of the special assessment, “[a] member who viewed the dues statement in conjunction with the website therefore had even greater reason to believe that payment of the special assessment was a condition of APA membership.” In the face of the APA’s contention that despite the misleading language on the dues statements, plaintiffs should have investigated further before paying what they thought was required, the D.C. Circuit panel disagreed, stating that “plaintiffs reasonably could have concluded that the meaning of the dues statement was clear, such that there was no reason to investigate further.”
Lead attorney for the plaintiffs, Hassan Zavareei, explained, “This decision by the DC Circuit establishes the basis for a nationwide class against the APA for its deceptive charges of its own members. We are pleased that the case can now proceed so that we can seek restitution for the thousands of psychologists who were duped into paying hundreds of dollars for controversial lobbying efforts by the APA lobbying entity.” The case will now be remanded to the United States District Court for the District of Columbia for further proceedings. The plaintiffs were also represented by Wexler Wallace, LLP, Miller Law Firm, P.C., Greg Coleman Law PC, and Whitfield Bryson & Mason LLP. In addition, Tycko & Zavareei represents the plaintiff in a related class action, Grossman v. American Psychological Association and American Psychological Association Practice Organization.
A copy of the opinion can be found here.