Telephone Consumer Protection Act

SEVENTH CIRCUIT GROWS WEARY OF EXCESSIVE TCPA LITIGATION PRIMARILY BENEFITING PLAINTIFF’S ATTORNEYS

The Seventh Circuit recently issued its decision in

Bridgeview Health Care Ctr., Ltd. v. Clark

, Case Nos. 14-3728 &15-1793 (March 21, 2016), holding that agency rules apply in determining whether a fax is sent “on behalf” of a principal in violation of the Telephone Consumer Protection Act (“TCPA”).  The appeal arose out of unsolicited fax advertisements which were blasted across multiple states in violation of the TCPA. While the parties agreed that the TCPA was violated, they disputed who was responsible for sending the faxes -- the company advertised in the faxes or the marketing company that actually sent the faxes.  The district court determined that the defendant was only liable for those faxes it authorized the marketing company to send.  The Seventh Circuit affirmed.

A fax sender is defined in federal regulations as either the person “on whose behalf” the unsolicited ad is sent or the person whose services are promoted in the ad.  The Seventh Circuit found the district court correctly rejected strict liability as applicable to junk faxes and held that “[i]n applying the regulatory definition of a fax sender . . . agency rules are properly applied to determine whether an action is done ‘on behalf’ of a principal.”  After analyzing each of the three types of agency (express actual authority, implied actual authority, and apparent authority) in the context of the case, the Court found that none of them applied to faxes sent outside a 20-mile radius of defendant’s business.

Notably the Court took the appeal as an opportunity to criticize the current state of TCPA litigation, noting:

[W]hat motivates TCPA suits is not simply the fact than an unrequested ad arrived on a fax machine.  Instead, there is evidence that the pervasive nature of junk-fax litigation is best explained this way: it “has blossomed into a national cash cow for plaintiff’s attorneys specializing in TCPA disputes.”. . . We doubt that Congress intended the TCPA, which it crafted as a consumer-protection law, to become the means of targeting small business.  Yet in practice, the TCPA is nailing the little guy, while plaintiffs’ attorneys take a big cut. . . . Nevertheless, we enforce the law as Congress enacted it.

The Bridgeview opinion is a clear indication of the Seventh Circuit’s displeasure with the TCPA plaintiffs’ bar.  Indeed, the Court even took a shot at plaintiff’s attorneys, noting the attorneys “currently have about 100 TCPA suits pending” and used the marketing company’s hard drive to find plaintiffs.

For more information on the Bridgeview opinion or the TCPA generally, contact Katherine Olson at kolson@messerstrickler.com  or (312) 334-3444.

SIXTH CIRCUIT REJECTS HYPERTECHNICAL READING OF TCPA CONSENT REQUIREMENT

The Sixth Circuit recently joined the Federal Communications Commission (FCC) and Eleventh Circuit in holding that “prior express consent” can be obtained and conveyed via intermediaries. In Braisden v. Credit Adjustments, Inc., plaintiffs filed a putative class action contending that defendant violated the Telephone Consumer Protection Act (“TCPA”) when it placed calls to their cell phone numbers using an automatic telephone dialing system and artificial or prerecorded voice in an attempt to collect a medical debt. Defendant did not dispute that it placed the calls or that it used an autodialer. Rather, defendant maintained that by virtue of giving their cell phone numbers to the hospital where they received medical care, plaintiffs gave their “prior express consent” to receive such calls. The district court entered summary judgment for defendant on this basis and the Sixth Circuit affirmed.

Specifically, plaintiffs had received medical care from a hospital which utilized the services of a third party anesthesiologist. When the anesthesiologist did not get paid, the anesthesiologist transferred the delinquent accounts to defendant for collection. Defendant contacted plaintiffs at the numbers provided by the anesthesiologist, which had received the numbers from the hospital. Notably, the plaintiffs had signed admission forms permitting the hospital to release their “health information” to third parties for purposes of “billing and payment” or “billing and collecting monies due.” Plaintiffs argued that because they had not given their numbers to defendant or the creditor on whose behalf it was calling, plaintiffs had not provided prior express consent to be called at those numbers. The Sixth Circuit disagreed, finding that the FCC held in a 2014 Declaratory Ruling that consent can be obtained and conveyed by intermediaries. The Sixth Circuit further found that cell phone numbers fell within the definition of “health information” under a logical reading of the admission forms and rejected plaintiffs’ narrow interpretation of a 2008 FCC Declaratory Ruling which stated that a number must be “provided during the transaction that resulted in the debt owed.” Relying on its own prior ruling on the matter, the Sixth Circuit found that “during the transaction that resulted in the debt owed” was to be read as only applying to the “ ‘initial transaction’ that creates the debt.” Thus, “consumers may give ‘prior express consent’ . . . when they provide a cell phone number to one entity as part of a commercial transaction, which then provides the number to another related entity from which the consumer incurs a debt that is part and parcel of the reason they gave the number in the first place.”

For more information on the Sixth Circuit’s decision, “prior express consent” or the TCPA generally, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.

When a Creditor is a “Debt Collector” Under the FDCPA

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The Federal Trade Commission (“FTC”) recently released a statement that the meaning of “debt collector” may be more expansive under the Fair Debt Collection Practices Act (“FDCPA”) than previously thought. A “debt collector” is defined under the FDCPA as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” §803(6). With this definition, it has long been assumed that creditors who collect their own debts are not covered by the FDCPA. However, Section 803(6) goes on to say “the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts.”

The FTC has asserted FDCPA claims against companies using other names to collect their own debts, characterizing them as “debt collectors” under the FDCPA. The FTC has issued a warning toremind creditors that the FDCPA can in fact apply to creditors who collect on their own behalf. Creditors should regularly review their policies to ensure their practices and procedures follow all applicable laws and regulations.

View the FTC’s Original Post Here

To learn more about the FTC’s warning and how to avoid FDCPA violations please contact Joseph Messer at 312-334-3440 or jmesser@messerstrickler.com.

Middle District of Florida Denies Class Certification in Time Barred Debt FDCPA Case Based on Ascertainability & Predominance

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The facts of the case were simple. Plaintiff received a collection letter offering to “settle” her time-bared debt for a reduction in the balance. She filed sued alleging 15 U.S.C. §1692 et seq. (“FDCPA”) violations as the letter did not disclose the debt’s time-barred nature. Plaintiff moved for class certification seeking to represent a class of similarly situated letter recipients. However, despite the simple nature of the alleged violation, complexities nevertheless prevented class certification.

The court first discussed the class action ascertainability prong that must be satisfied as part of Federal Rule of Civil Procedure (“FRCP”) 23(a). The court noted that only letters seeking to collect “consumer” debts (i.e. those incurred for personal, family, or household purposes) could be included in a class seeking relief under the FDCPA.  As such, an initial question that must be answered is whether plaintiff could ascertain whether the debts at issue were “consumer debts.” The court explained that a plaintiff could not establish ascertainability, a necessary requirement for a class action, simply by asserting that class members could be identified using defendant’s records. Plaintiff must actually establish that the records are in fact useful for identification purposes and that identification would be administratively feasible.

The issue for plaintiff was that she relied on her bare assertion that certain records would reveal the nature of the proposed class members’ debts without actually explaining those records. In contrast, defendants provided actual evidence to controvert this conclusion in the form of declarations attesting to the fact that defendant’s records did not show the reasons for which each proposed class member’s debt was incurred. Moreover, Plaintiff introduced no evidence that demonstrated how the original creditor’s records showed the nature of the debt or even whether the original creditor still possessed transactional information for the accounts.

The second barrier to class certification was in establishing the predominance prong of FRCP 23(b)(3). The court agreed that the debts of persons meeting the proposed class definition were not necessarily time-barred and such a determination would require an individualized inquiry into the statute of limitations on each debt.  The court explained that many factors must be considered when determining the expiration of a limitations period, such as the char-off date, tolling issues, revival issues, and any actions between the debtor and creditor that may have modified their original agreement. In short, the court found these inquiries too individualized and detailed to meet the predominance prong.

Recently, time-barred debt has been a “hot topic” with not only the consumer bar but also with federal and state agencies tasked with consumer financial regulation. For more information on this topic, and other consumer financial issues, contact Nicole Strickler at nstrickler@messerstrickler.com or direct at 312-334-3442.

Third Circuit Rules “Regular Users” of Residential Telephone Lines Can Sue under the TCPA

The Third Circuit Court of Appeals recently decided that a “regular user” of a residential telephone has standing to sue under the Telephone Consumer Protection Act (“TCPA”).  In Leyse v. Bank of America National Association, the plaintiff answered a prerecorded telemarketing call from Bank of America on a residential landline shared with his roommate.  The roommate was the telephone number subscriber and the intended recipient of the call. The Third Circuit reversed the lower court’s dismissal of the case disagreeing with the lower court judge’s finding that only the “intended recipient” of a robocall is a “called party” for purposes of the law.  Judge Fuentes of the Third Circuit wrote, “If the caller intended to call one party without its consent but mistakenly called another, neither the actual recipient nor the (uninjured) intended recipient could sue, even if the calls continued indefinitely.  We doubt Congress meant to leave the actual recipient with no recourse against even the most unrelenting caller.”

The TCPA restricts telephone solicitations and the use of telephone equipment.  The TCPA makes it unlawful “to initiate any telephone call to any residential telephone line using artificial or prerecorded voice to deliver a message without the prior express consent of the called party” except in emergencies or circumstances exempted by the Federal Communications Commission.

The plaintiff in Leyse still has the burden of proof to demonstrate that he answered the telephone when the robocall was received.  This ruling could greatly expand the scope of potential liability for errant calls.

For more information on this topic, contact Stephanie A. Strickler at 312-334-3465 or sstrickler@messerstrickler.com.

“All-For-Lawyer And Zero-For-Class” Settlement was Far From Fair, Reasonable, or Adequate

In a move that likely left plaintiffs’ class attorneys feeling less confident, the United States District Court for the Northern District of Illinois declined to approve a proposed class action settlement, finding it was “all-for-lawyer and zero-for-class.” In Grok Lines, Inc. v. Marshall Truck Lines, Inc., a company purchased a list of fax numbers and sent an unsolicited junk marketing-fax to approximately 180 numbers.  This fax was a one-time marketing experiment which proved to be quite costly, as sending unwanted advertisements by fax is prohibited by the Telephone Consumer Protection Act (“TCPA”) unless certain conditions are met (such as prior express consent by the recipient).  Violators of the TCPA are liable for $500 in damages per violation and knowing or willful violations can treble damages to $1500 per violation.  Since the named plaintiff never provided its prior express consent, a class action lawsuit was filed.

After litigation and negotiation, both plaintiff and defendant asked the Court to approve a settlement agreement for the class action.  The proposed agreement amounted to $100,000 in monetary damages plus injunctive relief enjoining defendant from practices which violate the TCPA.  The problem for the court, however, was that of the monetary relief: $98,500 went to the plaintiff’s attorney, $1500 to the named plaintiff, and $0 to the remaining class.

The Court highlighted that a settlement under these circumstances must be fair, reasonable, and adequate for the proposed class.  While injunctive-only relief may be appropriate at times, the Court found it lacked substance in this case.  Indeed the defendant “promised” to do what it was already obligated to do – avoid violating the TCPA.  Coupled with the fact that the fax giving rise to this lawsuit was a one-time marketing experiment, there was little-to-no-risk that it would commit the same mistake.  Thus, the injunctive benefit for the case really had no value to the class members.  As such, the Court rejected the settlement proposal and sent the parties back to the drawing board to come up with an agreement that is fair, reasonable, and adequate to the remaining class members.  It is likely safe to assume that the fee to the fee plus the benefit to the class ration will not be as lop-sided when the parties present their next settlement proposal.

For more information on the TCPA and its application, please contact Adam Hill at 312-334-3480 or ahill@messerstrickler.com for more information.

 

Further Reading

Window to Apply for FCC’s Retroactive Solicited Fax Opt-Out Waiver Closing

TEXAS COURT RULES CELL PHONE AREA CODE INSUFFICIENT TO ESTABLISH PERSONAL JURISDICTION IN TCPA CASE

In a recent Southern District of Texas decision, the court held that contacting a cell phone number with an area code assigned to a particular state, by itself, is insufficient to establish personal jurisdiction over an out-of-state defendant when the call gives rise to an alleged claim under the Telephone Consumer Protection Act (TCPA).  See Cantu v. Platinum Mktg. Grp., LLC, Case No. 1:14-cv-71, 2015 U.S. Dist. LEXIS 90824 (S.D. Tex. July 13, 2015).  In Cantu, plaintiff alleged that defendant placed automated calls to his cellular telephone without his permission in violation of the TCPA.  On plaintiff’s motion for default judgment, the court considered its jurisdiction over defendant, a Florida corporation.  Plaintiff argued that the court had specific personal jurisdiction over defendant because “the phone number at which it reached Plaintiff has a Texas area code of 956.”  Essentially, plaintiff analogized calling a cell phone number with a Texas area code to directing a letter to a Texas resident.  Recognizing that we live in a very mobile society such that people keep their cellphone numbers as they move state to state, the Court determine[d] that showing that a TCPA defendant called a phone number in an area code associated with the plaintiff’s alleged state of residence does not, by itself, establish minimum contacts with that state” to allow the court to exercise personal jurisdiction over the defendant. The Cantu decision is in line with case law in the Northern District of Illinois.  See e.g., Sojka v. Loyalty Media, LLC, Case. No. 14-CV-770, 2015 U.S. Dist. LEXIS 666045 at *7 (N.D. Ill. May 15, 2015) (holding that text messages directed at cell phone numbers in Illinois area code did not demonstrate purposeful availment).  Some district courts, however, have ruled to the contrary.  See e.g., Luna v. Shac, LLC, Case No. C14-00607 HRL (N.D. Cal. July 14, 2014) (holding that “where [defendant] intentionally sent text messages directly to cell phones with California based area codes, which conduct allegedly violated the TCPA and gave rise to this action, [defendant] expressly aimed its conduct at California”).  Nonetheless, the Cantu and Sojka decisions should be of use to TCPA defendants wishing to challenge jurisdiction, specifically where the plaintiff has failed to suggest any evidence, aside from the phone’s area code, that defendant knew the plaintiff was a resident of that particular state.

For more information on personal jurisdiction and/or the TCPA generally, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.

 

SEVENTH CIRCUIT REVERSES PRIOR DECISIONS TO THE EXTENT THEY HOLD A DEFENDANT’S OFFER OF FULL COMPENSATION MOOTS THE LITIGATION OR OTHERWISE ENDS ARTICLE III STANDING

In a recent opinion, the Seventh Circuit ruled that a defendant’s offer of full compensation does not render an individual plaintiff’s claims moot.  See Chapman v. First Index, Inc., 2015 U.S. App. LEXIS 13767 (7th Cir. Aug. 6, 2015).  In Chapman, a facsimile recipient brought a lawsuit against the sender alleging two violations of the Telephone Consumer Protection Act (TCPA).  Defendant subsequently made an offer of judgment (“OOJ”) under Federal Rule of Civil Procedure 68 for $3,002.00, an injunction, and costs.  Section 227(b)(3)(B) of the TCPA authorizes awards of actual damages or $500 per fax, whichever is greater, and can be trebled if the violation was willful; while Section 227(b)(3)(A) allows for an injunction.  As Plaintiff failed to identify any actual damages, defendant’s OOJ constituted a fully compensatory offer.  Consequently, when the OOJ lapsed, the district court dismissed Plaintiff’s individual claims as moot. On appeal, the Seventh Circuit reversed and in doing so overruled Damasco, Thorogood, Rand, and similar decisions to the extent they held a defendant’s offer of full compensation moots the litigation.  The Court acknowledged that a case becomes moot only when it is impossible for a court to grant any effectual relief whatsoever to the prevailing party.  By that standard, plaintiff’s case was not moot as the district court could still award damages and enter an injunction.  “If an offer to satisfy all of the plaintiff’s demands really moots a case, then it self-destructs.”  Essentially, even if plaintiff had accepted the OOJ the district court could not have entered judgment, all it could do is dismiss the case, and in that sense as “soon as the offer was made, the case would have gone up in smoke[.]”

Importantly, but without ruling on same, the Seventh Circuit left open the possibility that the district court could have entered a judgment according to the offer’s terms.  Though Chapman holds a rejected OOJ, by itself, cannot render a case moot, Chapman certainly suggests that proper disposition of a case following an unaccepted offer of complete relief is for the district court to enter judgment in the plaintiff’s favor.  Consequently, defendants facing an unaccepted OOJ may choose to move for entry of judgment in accordance with the offer’s terms.  After judgment is entered, the plaintiff’s individual claims will become moot for purposes of Article III.

Notably, whether a class action is rendered moot when named plaintiffs receive an offer of complete relief is currently pending before the Supreme Court.  See Gomez v. Campbell-Ewald Co., 768 F.3d 871 (9th Cir. 2014), cert. granted sub nom. Campbell-Ewald Co. v. Gomez, 135 S. Ct. 2311 (May 18, 2015).  Recognizing same, the Seventh Circuit in Chapman admittedly felt compelled to “clean up the law of the circuit promptly[.]”

For more information on the Chapman decision, Rule 68 offers of judgment or the TCPA generally, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com

 

Independent Contractor Classification Narrowed by Department of Labor

On July 15, 2015, the Department of Labor (“DOL”) issued new guidance which would allow more workers to qualify for overtime pay.  In the Administrator’s Interpretation No. 2015-1, the DOL is narrowing the definition of an independent contractor taking the position that most work should be performed by employees and independent contractors should be used sparingly. Under this new guidance, the department considers six factors when determining a worker’s status:

■ The extent to which the work performed is an integral part of the employer’s business

■ The worker’s opportunity for profit or loss depending on his or managerial skill

■ The extent of the relative investments of the employer and the worker

■ Whether the work performed requires special skills and initiative

■ The permanency of the relationship

■ The degree of control exercised or retained by the employer

These six factors will be examined in relation to one another and no single factor can determine into which category a worker falls. Additionally, hiring business entities and independent contractors will not consequently protect an employer from liability under the Fair Labor Standards Act.

Finally, the DOL reinforces that the type and scope of work being performed should be reviewed before an independent contractor is hired. When it is appropriate to hire an independent contractor, ensure the correct indemnification provisions are in place to protect a company from any wage and hour claims that may arise. It is an employer’s duty to audit the status of all independent contractors in the event their duties or the work being performed becomes more akin to that of an employee as opposed to an independent contractor.

For more information on the new DOL guidance or any other employment law related matters, please contact Dana Perminas at 312-334-3474 or dperminas@messerstrickler.com for more information.

FCC 2015 Rulemaking Highlights

On July 10, 2015, the FCC issued its long-awaited rulemaking on the Telephone Consumer Protection Act (the “TCPA”). Undoubtedly, the rulings are heavily consumer centric offering little help to those businesses which have long complained of TCPA litigation abuse. Interestingly, the order resulted in two scathing dissents from FCC commissioners. Regardless as to the “side” taken, the ruling does offer valuable help in resolving issues that have been heavily litigated since the last FCC order. A highlight of the FCC’s determinations is contained herein: Interpretation of a dialer:  If the dialer is not “currently” or “presently” dialing random or sequential phone numbers, this condition does not exempt the equipment used from the TCPA’s definition of “dialer.”

Consent:

  • The following does not constitute “consent” for purposes of the TCPA:
    • Being on an acquaintance’s phone contact list.
    • Receiving consent from a prior subscriber or user of the telephone number.
  • Consumers may revoke consent at any time and through any reasonable means.
  • 2012 “Prior Express Written Consent” Rule for certain parties waived temporarily to allow gathering of updated consent.
  • Certain free, pro-consumer financial and health care-related messages are exempted from consent requirement.

Text messages:

  • Internet-to-phone text messages require consumer consent.
  • Text messages are “calls” subject to the TCPA
  • “On demand” text messages sent in response to a consumer request are not subject to the TCPA.

VoIP:

  • Carriers and Voice over Internet Protocol (VoIP) providers can implement call-blocking technology to help consumers stop unwanted robocalls.

Software:

  • Application providers that play a “minimal role” in sending text messages are not per se liable for unwanted robocalls.
  • Collect-call services are not liable for making unwanted robocalls when providing “call set-up” information.

For more information on the new ruling, please contact Nicole M. Strickler at 312-334-3442 or nstrickler@messerstrickler.com for more information.

FLORIDA COURT HOLDS CONSENT ISSUE PRECLUDES CLASS CERTIFICATION IN TCPA CASE

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The Middle District of Florida recently denied class certification in a Telephone Consumer Protection Act (TCPA) case where there was no “class-wide” proof as to whether proposed class members consented to automated calls to their cellular telephones. 

See

Shamblin v. Obama for Am.

, No 13-2428, 2015 U.S. Dist. LEXIS 54849 (M.D. Fla. Apr. 27, 2015).  In doing so, the court confirmed that the burden of proving critical issues are susceptible to class-wide proof falls on class-action plaintiffs regardless of whether defendants bear the ultimate burden of proving or disproving certain issues at trial (in this case consent).

The TCPA makes it illegal to call any telephone number assigned to a cellular telephone service using an automatic-telephone-dialing system or an artificial or pre-recorded voice, unless the consumer expressly consents to same.

 In

Shamblin

, plaintiff filed a putative class action against Obama for America after receiving two unsolicited auto-dialed calls to her cellular telephone.  In finding that the commonality, predominance and superiority requirements for class certification were not satisfied, the court reasoned that Plaintiff was “not entitled to a presumption that all class members failed to consent” despite a lack of documentary evidence of consent and “[d]efendants have a constitutional right to a jury determination as to whether any person consented to receiving calls to their cellular telephone.”   As there was no class-wide proof available to decide consent, individualized inquiries into consent (including where, how, and when) would predominate trial, precluding class certification.

The Shamblin decision indicates that class treatment may not be the appropriate mechanism for adjudicating TCPA disputes where individual determinations with respect to consent exist.  For more information on the Shamblin decision or the TCPA generally, contact Katherine Olson at 312-334-3444 or kolson@messerstrickler.com.

Federal Court Determines Voicemail Message and Return Phone Call with an Unintended Recipient Not in Violation of FDCPA

A federal court in New York recently decided that a voicemail message stating that the call was from a debt collector where the voicemail message’s intended recipient was disclosed to a third party who returned the call was not a violation of the Fair Debt Collection Practices Act (“FDCPA”).  In Abraham Zweigenhaft v. Receivables Performance Management, LLC, RPM left the following voicemail message:  “We have an important message from RPM.  This is a call from a debt collector.  Please call 1(866) 212-7408.”  Mr. Zweigenhaft’s son heard the message and returned the call.  He then had the following conversation with the RPM representative: RPM: Thank you for calling Receivables Performance Management on a recorded line. This is Michelle how can I help you?

Caller: Hi how are you? I received a message to call you, and I am just trying to figure out who you are trying to reach.

RPM: Okay and your phone number please, area code first.

Caller: (718) 258-9010

RPM: And is this Abra?

Caller: Is this who?

RPM: Abra Zweigenhaft?

Caller: Nope. It's not.

RPM: Okay let me go ahead and take your phone number off the list. The last four digits again please. 9010 or 7032?

Caller: 9010

RPM: Okay I'll take it off the list. You have a nice day.

Caller: Thank you.

RPM: Uh huh, bye bye.

Zweigenhaft filed suit against RPM alleging that the content of the voicemail message and the phone call together conveyed information regarding the consumer’s debt to a third party, Zweigenhaft’s son, in violation of FDCPA § 1692c(b).  The United States Court for the Eastern District of New York disagreed that this was a violation.  The court recognized the statute’s conflicting provisions.  Debt collectors are required by the FDCPA to meaningfully identify themselves when calling a consumer, but doing so may inevitably convey information about a consumer’s debt, which if overheard by a third party gives rise to consumer arguments that the debt collector violated the FDCPA.  In finding that the communications did not violate the FDCPA, the court stated that if it were to find that the contact was a violation of the FDCPA “would place an undue restriction on an ethical debt collector in light of our society’s common use of communication technology.”

For more information on this topic, contact Joseph Messer at 312-334-3440 or at jmesser@messerstrickler.com or Stephanie Strickler at 312-334-3465 or at sstrickler@messerstrickler.com.

 

MOOTED TCPA CLAIM REVIVED IN SECOND ACTION AGAINST SAME DEFENDANTS

The Eastern District of New York recently held that a plaintiff’s TCPA claims were not precluded by the Southern District of Texas’ ruling that the same claims against the same defendants were mooted by a Rule 68 offer of judgment.  See Bank v. Spark Energy Holdings, No. 13-6130, 2014 U.S. Dist. LEXIS 84493 (E.D.N.Y. June 20, 2014). 

The plaintiff alleged that he received telemarketing calls from defendants “using an artificial or prerecorded voice” without his prior express consent in violation of the Telephone Consumer Protection Act (“TCPA”).  He initially filed a class action suit in the Southern District of Texas, where after nearly two years of defending the case and prior to plaintiff moving for class certification, defendants made a Rule 68 offer of judgment offering plaintiff complete relief.  Although the plaintiff rejected the offer, the Texas court found that the offer rendered plaintiff’s claims moot because he no longer had a personal stake in the outcome of the litigation.  Accordingly, the Texas court dismissed the plaintiff’s claims for lack of subject matter jurisdiction. 

Shortly thereafter, the plaintiff filed suit in the Eastern District of New York and asserted the same TCPA claims against the same defendants.  The defendants moved to dismiss the claims based on the preclusive effect of the Texas court’s ruling.  The New York court denied the motion to dismiss, reasoning that neither claim nor issue preclusion applied.  The New York court held that claim preclusion only applied if there was a final judgment on the merits in the prior action and that dismissal for lack of subject matter jurisdiction is generally not considered a final judgment on the merits.  The New York court further held that issue preclusion did not apply because an identical issue was not adjudicated in the prior action:

"I find that the identical issue is not presented here because the prior’ court’s determination of mootness relied on particular factual circumstances that are not the same as the facts presented in this suit.  In the Texas case, the court decided that plaintiff’s individual TCPA claim was moot because plaintiff had rejected a Rule 68 offer that would have provided complete relief on his claim.  In this suit, defendants have not made any Rule 68 offer, so the court is not presented with the same factual scenario.  Since the first requirement to establish issue preclusion is not satisfied, the Texas court’s prior finding of mootness does not require the dismissal of plaintiff’s claims as moot in this action."

While the New York judge did express sympathy for defendants’ position (having litigated plaintiff’s TCPA claim for almost two years in Texas, successfully moving to have the suit dismissed, and now facing the same TCPA claims in New York), she nevertheless found in favor of the plaintiff, stating: “[a] finding that a claim is moot in one case simply does not mean that claim is moot in all subsequent cases.”

While the opinion appears to undermine the goals that the mootness and preclusion doctrines were meant to serve, if this tactic gains traction, defendants should consider immediately making the same offer of judgment upon notice of the second lawsuit.  Defendants should also consider filing a motion to transfer venue to the first court rather than relitigating the mootness issue in the second court. 

For more information on the aforementioned case and the TCPA generally, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.  

Eleventh Circuit Imposes Liability on Autodialed Calls and Defines TCPA Language

The Eleventh Circuit Court of Appeals recently reversed a district court’s decision to grant summary judgment in favor of a debt collector in a Telephone Consumer Protection Act (“TCPA”) case.  In its decision, the Eleventh Circuit provided further clarification on the Act’s definitions of “prior express consent” and “called party” and stressed the importance of verifying cellular telephone ownership before contacting a person attempting to collect a debt.

In Osorio v. State Farm Bank, F.S.B., Clara Betancourt applied for a State Farm credit card and listed the cell phone number of her long-time partner Fredy Osorio in the application.  Later Betancourt failed to make timely minimum payments on her credit card account.  Subsequently, State Farm hired a debt collector to garnish the payments, who placed 327 autodialed calls over the six month period to Osorio’s cell phone number.  Osorio filed a lawsuit claiming that even though Betancourt was his girlfriend, she did not have the authority to consent on his behalf to receive debt collection calls on his cell phone number.  Moreover, if Betancourt had such authority, Plaintiff revoked that consent later during his telephone conversations with the debt collector.

The TCPA claims in this case were dismissed by the trial court, granting summary judgment in favor of State Farm.  Osorio appealed and the Eleventh Circuit Court reversed the trial court’s decision.

Below are several takeaways from Eleventh Circuit decision:

  1. Prior express consent must come from the called party.  The Eleventh Circuit addressed the meaning of the term “called party” and held that the term refers to the actual current subscriber of the cellular phone number.  In this determination the Court sided with the Seventh Circuit’s decision in Soppet v. Enhanced Recovery Company, LLC.  The Eleventh Circuit also agreed with the Seventh Circuit in that called party does not refer to the intended recipient of the phone call.  The Eleventh Circuit stated: “…we believe this really means that Betancourt had no authority to consent in her own right to the debt-collection calls to [Osorio] because one can consent to a call only if one has the authority to do so, and only the subscriber (here, Osorio) can give such consent, either directly or through an authorized agent.”
  2. Prior express consent may be given by the agent of the called party.  Even though the Court did state that one adult might authorize another to give consent to make calls to their cellular telephone number in some circumstances, the Court found that long-term relationship between Betancourt and Osorio was not sufficient to provide Betancourt an authority to give State Farm consent on behalf of Osorio to call his cell phone.
  3. Oral revocation of prior express consent by the called party is allowed.  The Court noted that even though the Fair Debt Collections Practices Act (“FDCPA”) requires a consumer to notify the debt collector in writing if they do not wish to be contacted by the debt collector, the TCPA does not contain the same language.  Also, the Eleventh Circuit agreed with the Third Circuit’s decision in Gager v. Dell Financial Services, LLC, which states: “in light of the TCPA’s purpose, any silence in the statute as to the right of revocation should be construed in favor of consumers.”
  4. TCPA violations can occur if a cell phone call has been placed- it is not necessary for a charge to incur.  The Eleventh Circuit held that a TCPA violation still occurs even if the call placed was not charged: “To state the obvious, autodialed calls negatively affect residential privacy regardless of whether the called party pays for the call.”  In support of its decision, the Court relied on the Act’s definition -- that it prohibits autodialed calls “to any telephone number assigned to a paging service, cellular telephone service, specialized mobile radio service, or other radio common carrier service, or any other service for which the called party is charged for the call.”  The Court was convinced that the phrase regarding charges is related to the previous phrase and not to the whole definition.

In light of this decision, debt collectors should verify the current ownership of all cellular phone numbers they are currently calling or are intending to call.  These actions will help protect debt collectors from TCPA liability risks that are related to calling shared cell phone numbers, recycled number or wrong telephone numbers.  For more information you may contact Joe Messer at (312) 334-3440 or at jmesser@messerstrickler.com and Stephanie Strickler at (312) 334-3465 or at sstrickler@messerstrickler.com.  

FCC Clarifies TCPA: Prior Express Consent May Be Obtained by a Third Party

On March 27, 2014, the Federal Communication Commission (“FCC”) released a Declaratory Ruling in the matter of GroupMe, Inc./Skype Communications S.A.R.L petition to clarify the rules and regulations implementing the Telephone Consumer Protection Act (“TCPA”) of 1991.  This ruling relates to situations in which a consumer may give their express consent to receive calls to an intermediary rather than to the calling party itself.

According to its petition, GroupMe provides a free group text messaging service for groups of up to 50 members.  Those creating groups must be registered member with GroupMe, and in so doing agree to GroupMe’sTerms of Service (TOS).  The TOS contains a representation that all members being added to the group have consented to receiving text messages.

Considering the consumer protection policies and goals underlying the TCPA the FCC ruled: “We clarify that text-based social networks may send administrative texts confirming consumers’ interest in joining such groups without violating the TCPA because, when consumers give express consent to participate in the group, they are the types of expected and desired communications TCPA was not designed to prohibit, even when that consent is conveyed to the text-based social network by an intermediary (emphasis added).”  The FCC added that consumer’s prior express consent may be obtained through and conveyed by an intermediary, such as the group organizer using GroupMe’s service.

The FCC’s ruling is helpful clarification that prior express consent as required under the TCPA may in certain circumstances be obtained through a third party.  To learn more about the TCPA and its restrictions on debt collection industry, you may contact Joseph Messer at jmesser@messerstrickler.com or at (312) 334-3440.

U.S. SUPREME COURT DENIES REQUEST TO RESOLVE CIRCUIT SPLIT ON “NO INJURY” ISSUE

On March 10, 2014, the U.S. Supreme Court denied without comment a request to review an Eighth Circuit decision which held a plaintiff has standing to sue for violations of a federal statute solely to recover statutory damages when related alleged statutory misconduct caused no real monetary injury.  See Mutual First Federal Credit Union, et al. v. Jarek Charvat, No. 13-679 (March 10, 2014). 

In Charvat, the consumer-plaintiff filed a class-action claiming that the bank-defendants did not display a physical placard disclosing fees at their ATMs as previously required by the Electronic Fund Transfer Act.  Despite affirmatively accepting the fee following digital notice during the ATM transactions, plaintiff asserted he was entitled to statutory damages for the defendants’ violations.

Defendants argued that because plaintiff did not suffer any injury-in-fact, he lacked standing to sue.  On appeal, the Eighth Circuit held that the plaintiff did not have to show direct monetary injury to bring suit; rather, the “informational injury” allegedly suffered by the plaintiff was sufficient to give him standing to prosecute a claim for statutory damages.  

The “no injury” issue in Charvat often arises in Fair Debt Collection Practices Act (“FDCPA”) and Telephone Consumer Protection Act (“TCPA”) cases, where often courts allow recovery of extraordinary statutory damages and attorneys’ fees for technical violations which cause no actual harm.  Had the Supreme Court considered the Charvat case and reversed the Eight Circuit opinion, consumers would have been extremely limited in their ability to sue and collect damages under the FDCPA and TCPA. 

There is currently a split among the circuit courts of appeals on the “no injury” issue.  The Sixth, Eighth and Ninth Circuits have held that standing is satisfied when the only harm alleged is a technical violation of a federal statute, while the Second, Fourth and Tenth Circuits disagree.  Thus, it is surprising that the Supreme Court did not accept the opportunity to resolve the circuit split.  Although the Supreme Court denied the writ of certiorari, there is no indication that the Supreme Court agrees with the Eighth Circuit’s holding. Rather, the denial simply means that the justices concluded that the circumstances described in the Charvat petition were not sufficient to warrant review. Accordingly, the divide amongst the circuits remains and Charvat is binding precedent only in the Eighth Circuit.

For more information on the Charvat case, please contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.

United States District Court Judge Grants Collection Agency’s Motion to Stay TCPA Class Action Pending FCC Clarification

On February 20, 2014, the Western District of Washington granted a defendant-collection agency’s motion to stay a Telephone Consumer Protection Act (“TCPA”) class action.  In Hurrle v. Real Time Resolution, Inc., 2014 U.S. Dist. LEXIS 2204 (W.D. Wash. Feb. 20, 2014), a consumer filed a class-action lawsuit against a collection agency for allegedly calling his cellular telephone number using an autodialer to collect on a debt.  The plaintiff alleged that the calls were in violation of the TCPA, 47 U.S.C. § 227(b).  The collection agency filed a motion to stay the action pending the outcome of several petitions to Federal Communications Commissions (“FCC”), the Federal agency tasked with creating rules to implement the TCPA.  Specifically, the agency argued that debt collection calls, as non-telemarketing calls, were not subject to the TCPA.  The collection agency reasoned that the FCC, rather than the court, had the requisite expertise to determine whether the TCPA applied to debt collection calls.

Because plaintiff’s complaint alleged that the collection agency implemented an autodialer to call debtors regarding unpaid debt, the Western District agreed that the action should be stayed pending an FCC declaratory ruling.  In the Order, District Judge Benjamin H. Settle wrote, “[t]he law is unclear whether Congress intended the TCPA to prevent this activity.  Telemarketing is one activity while collecting debt from known debtors seems to be a wholly separate activity.  Whether the latter activity falls within the scope of the TCPA is currently being addressed by Congress and the FCC.”

This decision is interesting because the FCC has already ruled that content is irrelevant to a determination of whether the TCPA applies, at least in regard to cellular telephone numbers. In its 2008 Ruling, the FCC stated in relevant part,

“[t]he Commission also reiterates that the plain language of section 227(b)(1)(A)(iii) of the [TCPA] prohibits the use of autodialers to make any call to a wireless number in the absence of an emergency or the prior express consent of the called party.  The Commission notes that this prohibition applies regardless of the content of the call, and is not limited only to calls that constitute ‘telephone solicitations.’” 

Thus, the FCC has already recognized that all calls, at least to wireless telephone numbers, do implicate the TCPA. Further, in its TCPA orders, including those entered prior and subsequent to 2008, the FCC has specifically addressed debt collection and created specific regulations thereto. Moreover, several district courts throughout the country, relying on the FCC’s regulations, have held that the TCPA’s prohibition on calls to wireless telephone numbers applies to debt collection calls. Thus, to say the least, it is odd that this particular court has ruled that action should be stayed pending a decision on whether debt collection is exempted from the TCPA’s requirements.

For more information on this subject, contact Stephanie Strickler at 312-334-3465 or sstrickler@messerstrickler.com.  

VoIP Vendor Not Secondarily Liable for Caller’s Alleged TCPA Violations

A federal district court recently held that a vendor of a voice over internet protocol (“VoIP”) service that allows callers to circumvent caller identification by displaying an inaccurate number is not secondarily liable for the alleged Telephone Consumer Protection Act ("TCPA") violations of the caller who uses said service. 

In Clark v. Avatar Techs. PHL, Inc., No. 13-2777 (S.D. Tex. Jan. 28, 2014), the plaintiff alleged that the caller used an automatic telephone dialing system (ATDS) to place pre-recorded calls to him and also used a VoIP service which caused an inaccurate number to be displayed on his caller ID.  The plaintiff asserted TCPA claims against both the caller and the vendor of the VoIP service. The latter moved to dismiss the claim, arguing that it did not “make any call” as required by the TCPA.

The plaintiff conceded that the vendor did not “make any call[s]” but sought to impose TCPA liability based on a conspiracy theory.  The court rejected this basis for holding the vendor liable, finding that the TCPA does not allow for co-conspirator liability:

Plaintiff cites no legal authority to support the assertion that TCPA liability can be based on an alleged conspiracy, and this Court is aware of none. It is undisputed that the plain language of the statute does not specifically allow for such secondary liability. As a result, the Court declines to expand liability under the TCPA to a telecommunications carrier who is alleged to have conspired with the defendant who Plaintiff claims actually made the call.

Although the court dismissed the plaintiff’s conspiracy-based claim with prejudice, it allowed the plaintiff to amend his complaint to assert an independent claim against the vendor under Section 227(e) of the TCPA.  Section 227(e) provides that it is “unlawful for any person within the United States, in connection with any telecommunications service or IP-enabled voice service, to cause any caller identification service to knowingly transmit misleading or inaccurate caller identification information with the intent to defraud, cause harm, or wrongfully obtain anything of value.”  The court noted that this practice (called “spoofing”) has “both improper and legitimate applications” and is only prohibited if it is “intended to do harm.” Because plaintiff did not previously assert § 227(e) as the basis for his TCPA claim, the court granted him leave to do so.

For more information on this topic or the TCPA generally, please contact Katherine Olson at 312-334-3444 or kolson@messerstrickler.com.

CALIFORNIA COURTS HIT THE BRAKES ON PUTATIVE TCPA CLASS ACTIONS WITH THEIR ENFORCEMENT OF ARBITRATION PROVISIONS

Two federal district courts in California recently granted defendants’ motions to compel arbitration, sending two putative TCPA class actions to arbitration.  In Mendoza v. Ad Astra Recovery Services, Inc., No. 2:13-cv-06922 (Jan. 6, 2014 C.D. Cal.), plaintiff brought a TCPA class action against an agent of a payday lending firm who had left pre-recorded voicemail messages on his cell phone regarding a debt he had failed to repay.  Plaintiff, however, had signed a contract with the payday lending firm at the time he received the loan, by which he waived the right to pursue a class action and agreed to arbitrate any potential claims.  The arbitration clause covered “any claim, dispute or controversy between you and us (or related parties) that arises from or relates in any way to this Agreement . . . ; any of our marketing, advertising, solicitations and conduct relating to your request for Services; our collection of any amounts you owe; or our disclosure of or failure to protect any information about you.”

Plaintiff raised three arguments against enforcement of the arbitration provision.  First, he argued that defendant lacked standing to enforce the agreement.  The court rejected this argument, finding that defendant had standing as an agent of the payday lending firm.  Plaintiff next argued that his claim was not covered by the arbitration clause.  The court disagreed, noting that the clause was extremely broad.  Under the clause, “‘[c]laim’ [was] to be given the broadest possible meaning and include[d] . . . claims based on any . . . statute[.]”  Importantly, the clause also expressly included claims arising out of debt-collection activities.  Lastly, plaintiff argued that the arbitration provision was unconscionable.  The court found that the clause was not procedurally unconscionable because it “gave plaintiff the unilateral right to reject arbitration at any time within 30 days of signing the contract.”  The court also found that the clause was not substantively unconscionable because the clause was set out conspicuously on a separate page of the contract and the contract contained the following warning:

VERY IMPORTANT. READ THIS ARBITRATION PROVISION CAREFULLY. IT SETS FORTH WHEN AND HOW CLAIMS . . . WILL BE ARBITRATED INSTEAD OF LITIGATED IN COURT. IF YOU DON’T REJECT THIS ARBITRATION PROVISION IN ACCORDANCE WITH SECTION 1 BELOW, UNLESS PROHIBITED BY APPLICABLE LAW, IT WILL HAVE A SUBSTANTIAL IMPACT ON THE WAY IN WHICH YOU OR WE RESOLVE ANY CLAIM.

In Sherman v. RMH, LLC, et al., No. 13-cv-1986 (Jan. 2, 2014 S.D. Cal.), plaintiff brought a TCPA class action against a dealership who had left a pre-recorded voicemail message on his cell phone reminding him that it was the anniversary of his auto purchase and that it was time for “another status review of [his] ownership experience.”  When plaintiff purchased his car, however, he signed a Retail Installment Sales contract which included an arbitration clause.  Like the clause in Mendoza, the arbitration clause contained in the Retail Installment Sales contract was broad enough to encompass plaintiff’s claim: “Any claim or dispute, whether in contract, tort, statute or otherwise . . ., between you and us or our employees, agents, successors or assigns, which arise out of or relate to your credit application, purchase or condition of this vehicle, this contract or any resulting transaction or relationship . . . shall, at your or our election, be resolved by neutral, binding arbitration and not by a court action.”  The court like its counterpart in the Central District, rejected the plaintiff’s arguments that the clause did not cover the claim at issue and that the clause was unconscionable. 

By signing contracts containing arbitration clauses, the plaintiffs in the aforementioned cases relinquished any right to pursue TCPA claims through a class action. These recent decisions stress the importance of ensuring that arbitration clauses contain class action waivers and are broad enough to encompass potential TCPA claims.  For more information on this topic or assistance in reviewing or drafting arbitration clauses, please contact Katherine Olson at 312-334-3444 or kolson@messerstrickler.com.  

TCPA Traps in Health Care Collections: ACA International’s Article on Joe Messer & Nicole Strickler’s Presentation at ACA Fall Forum

Last month, Joe Messer and Nicole Strickler, partners at Messer Strickler, Ltd., gave two presentations at the ACA International’s 2013 Fall Forum in Chicago. The topics of their presentations were: “Avoiding TCPA Traps in Health Care Collections” and “The Forgotten and Misunderstood: Avoiding Liability under State Laws Affecting Debt Collection.” ACA International, the Association of Credit and Collection Professionals shared an overview, as well as valuable takeaways from one of these presentations with its audience by publishing an article “TCPA Traps in Health Care Collections” on the organization’s website. The presentation focused on the overview of the Telephone Consumer Protection Act (“TCPA”), vicarious liability for collectors and their health care provider clients, and recent TCPA case law that regulates medical debt collection. To emphasize the importance of Joe and Nicole’s message and information they shared, ACA International warned its audience in the article: “Violations of the TCPA can result in catastrophic class-action liability for collectors and their health care provider clients who may be sued on ‘vicarious liability’ grounds.”

Joe and Nicole have earned a national reputation for successfully defending lawsuits brought under the Fair Debt Collection Practices Act (“FDCPA”), Fair Credit Reporting Act (“FCRA”), TCPA, and other state and federal consumer protection laws. Both Joe and Nicole have substantial experience defending corporations, lending institutions, collection agencies, asset purchasers, lawyers as well as individuals; they have conducted many trials in state and federal courts and have served as lead counsel on multiple class action cases. Joe and Nicole are also active members and often presenters at ACA International, NARCA, NAPBS, ABA and other professional organizations.

To learn more about Telephone Consumer Protection Act and TCPA traps in health care collections, as well as potential liability for collectors in health care and other industries, contact Joe Messer at (312) 334-3440 or Nicole Strickler at (312) 334-3442.