tcpa class actions: phone, text and fax solicitation...
TRANSCRIPT
TCPA Class Actions: Phone, Text and Fax Solicitation Claims on the Rise Leveraging New Developments in Federal Enforcement, Jurisdiction and Class Suitability
Today’s faculty features:
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THURSDAY, DECEMBER 19, 2013
Presenting a live 90-minute webinar with interactive Q&A
John G. Watts, Founder, Watts & Herring, Birmingham, Ala.
Keith J. Keogh, Founder, Keogh Law, Chicago
Paul G. Karlsgodt, Partner, Baker Hostetler, Denver
Justin T. Winquist, Baker Hostetler, Denver
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OVERVIEW OF THE TCPA AND DISCUSSION OF
MIMS V. ARROW Where did we start from, where are we now, and where are we
heading?
Strafford Webinar December 19, 2013
John G. Watts
A (fax) blast from the past....
• In 1991 fax machines would run out of paper in the morning....
• Fax "blasts" were a marketer's dream to quickly and cheaply communicate to prospects
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Dinner calls....
• "Computerized calls are the scourge of modern civilization. They wake us up in the morning; they interrupt our dinner at night; they force the sick and elderly out of bed; they hound us until we want to rip the telephone right out of the wall.“ Senator Hollings, quoted in Mims v. Arrow, 132 S.Ct. at 752.
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So what does the TCPA prohibit?
• For our purposes, two types of communications:
• First, auto dialed calls or calls with a pre-recorded or artificial voice to cell phones without permission/consent (this includes text messages – think Papa Johns and recent basketball lawsuits)
• Second, pre-recorded telemarketing calls to land lines without permission or consent
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In the past, what were the common cases?
• Cases in the 90s and early 2000s predominantly were fax cases -- "junk fax" cases.
• Cell phones were not as widespread.
• But as technology for dialing systems improved, and cell phones abounded . . . .
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Cell phone cases are currently the most common TCPA cases in private suits • A few reasons: • Many offices, except lawyers, don't have a
fax machine • Virtually every person has a cell phone • Many individuals only have a cell phone • Whether for collection actions or marketing
purposes, auto dialing or texting cell phones is the cheapest route to reach consumers
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What are the possible damages?
•While actual damages can be recovered, the key focus is on statutory damages which can be $500 per violation.
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But wait! The statutory damages can actually be $1500 per call....
•"If the court finds that the defendant willfully or knowingly violated this subsection or the regulations prescribed under this subsection, the court may, in its discretion, increase the amount of the award to an amount equal to not more than 3 times the amount available under subparagraph (B) of this paragraph."
•47 U.S.C. Section 227(b)(3)
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"Put that to the calculator...."
•We have individual cases where the number of calls exceed 400 calls.
•400 * $500 = $200,000
•400 * $1500 = $600,000
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Which would you prefer, a class action or individual action?
• Because of the statutory nature of the $500 or $1500 per call, many cases are ideally suited for class actions from the consumer's perspective.
• However, cases involving large numbers of calls or texts may be better suited to individual actions.
• The issue of consent is always present, but particularly in class actions.
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So if you sue, can you file suit in federal court?
• Or can the defendant remove a state court case to federal court?
• Before Mims, the answer is the favorite lawyer answer of "it depends."
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The world before Mims v. Arrow
• The question: Can a private TCPA suit be brought in Federal Court under "Federal Question Jurisdiction?" o Some circuits allowed these types of suits.
o Some circuits, including the Eleventh, said "No" as
only state courts had jurisdiction to hear TCPA cases.
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So what is the Mims case?
•Mims v. Arrow Financial Services, LLC, 132 S.Ct. 740 (2012).
•Mims started off as a case filed in S.D.Fla under the TCPA.
•Defendant moved to dismiss as 11th Cir. precedent said "Congress vested jurisdiction over private actions under the TCPA exclusively in state courts."
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Mims -- the backstory....
•District court dismissed it and the 11th Cir. affirmed the dismissal.
•Here's the reason:
•Private cause of action is allowed "in an appropriate court of [a] State," "if [such an action is] otherwise permitted by the laws or rules of court of [that] State." Mims at 744.
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The Supreme Court speaks....
•The opinion is fairly straightforward -- the TCPA is a federal cause of action and federal causes of action can be brought in federal court unless Congress specifically says "No."
•We’ll skip all but one of the arguments for time’s sake.
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Let’s look at the “floodgates” argument
•"Arrow's floodgates argument assumes a 'shocking degree of noncompliance' with the Act . . . and seems more imaginary than real."
•Mims at 753.
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Supreme court's holding simply stated
•"[W]e apply the familiar default rule: Federal courts have Section 1331 jurisdiction over claims that arise under federal law."
•Mims at 753.
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Where do we go from here?
• Are TCPA cases suitable for class treatment? • What about text messages to cell phones? • What about third party liability? • Why should we expect a great increase in the
number of “land line” cases because of a change in the law in October of this year?
• These questions will be answered in the rest of the presentation.
• Please ask any questions that you have as this presentation is for you.
• Let's explore these issues as we go forward....
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Feel free to contact me if any questions....
• John G. Watts • Watts & Herring, LLC • Birmingham, Alabama • [email protected]
• 205-879-2447
• www.AlabamaConsumer.com
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TELEMARKETING vs DEBT COLLECTION • FCC has treated consent differently depending on the content
of the call even though the TCPA is content neutral.
• 2008 FCC Order governs debt collection consent.
• 2012 FCC Order governs telemarketing
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The burden is on the caller to show that the wireless number was provided by the consumer to the creditor, and that such number was provided during the transaction that resulted in the debt owed. See In the Matter of Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991 (“2008 FCC Ruling”), 23 F.C.C.R. 559 at ¶ 10 (Dec. 28, 2007)(Emphases added). "during the transaction that resulted in the debt owed," includes voluntary providing the cell sometime after the account is opened. Moore v. Firstsource Advantage, LLC, 2011 U.S. Dist. LEXIS 104517, 30-31 (W.D.N.Y. Sept. 15, 2011).
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On February 15, 2012, the FCC issued a new Report and Order that redefined “prior express consent” for all telemarketing calls. - Debt collection calls and several other categories of calls are not affected. - signed by the consumer and be sufficient to show that he or she:
- (1) received “clear and conspicuous disclosure” of the consequences of providing the requested consent, i.e., that the consumer will receive future calls that deliver prerecorded messages by or on behalf of a specific seller; and
- (2) having received this information, agrees unambiguously to receive such calls at a telephone number the consumer designates.
- ALLOWS FOR CONSENT TO BE CONTRACTUAL.
FCC “CLARIFIES” CONSENT
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REVOCATION OF CONSENT • The FCC unequivocally held that consumers may effectively revoke
consent under the TCPA In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, Declaratory Ruling as to Petition of SoundBite Communications, Inc., CG Docket No. 20-278 (Nov. 29, 2012) (“SoundBite Ruling”).
• Recognizing “neither the text of the TCPA nor its legislative history directly addresses the circumstances under which prior express consent is deemed revoked,” the FCC, citing its powers to interpret the TCPA, held that a consumer can opt-out of “prior express consent” under §227(b)(1)(A). A one-time text message confirming a consumer’s request to opt out of autodialed text messages to her cell phone would not violate the TCPA, but additional messages would violate the TCPA because consent to call has been revoked
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Gager v. Dell Fin. Servs.
• 3rd Circuit examined:
(1) whether the TCPA allows a consumer to revoke her "prior express consent" to be contacted via an automated telephone dialing system on her cellular phone and • (2) if a revocation right exists, whether there is a temporal limitation on that right.
• “Our analysis of the scope of the TCPA is guided by the text of the statute, the
FCC's interpretation of the statute, the statute's purpose, and our understanding of the concept of consent as it exists in the common law. See Restrepo v. Att'y Gen. of U.S., 617 F.3d 787, 793 (3d Cir. 2010). Considering all of these factors, we conclude that Gager has stated a plausible claim for relief because (1) the TCPA affords her the right to revoke her prior express consent to be contacted on her cellular phone via an autodialing system and (2) there is no temporal limitation on that right.” Gager v. Dell Fin. Servs., LLC, 2013 U.S. App. LEXIS 17579 (3d Cir. Pa. Aug. 22, 2013)
• DOESN’T ADRESS CONTRACTUAL CONSENT
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ON BEHALF OF LIABILITY
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FCC Orders Previously held: Party “on whose behalf” a telephone solicitation is made bears ultimate responsibility for any violations of the TCPA. Plaintiff’s position is that In re TCPA, 23 FCC Rcd. 559 (Jan. 4, 2008) Imposes strict liability for debt collection calls and 2013 order does not change this. 2013 FCC ORDER-Should be limited to Telemarketing FCC clarified its prior orders and held that “the prohibitions contained in section 227(b) incorporate the federal common law of agency and that such vicarious liability principles reasonably advance the goals of the TCPA.” 2013 FCC Order at p. 14, ¶ 35.
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To provide guidance, the 2013 Order stated: “apparent authority may be supported by evidence that the seller allows the outside sales entity access to information and systems that normally would be within the seller’s exclusive control, including: access to detailed information regarding the nature and pricing of the seller’s products and services or to the seller’s customer information. The ability by the outside sales entity to enter consumer information into the seller’s sales or customer systems, as well as the authority to use the seller’s trade name, trademark and service mark may also be relevant.” 2013 Order p. 19, ¶ 46. “a seller may be bound by the unauthorized conduct of a telemarketer if the seller is aware of ongoing conduct encompassing numerous acts by the telemarketer and the seller fails to terminate, or, in some circumstances, promotes or celebrates the telemarketer.” Id at p. 14, n. 104. In summary, the FCC stated that: “we see no reason that a seller should not be liable under [227(b)] for calls made by a third-party telemarketer when it has authorized that telemarketer to market its goods or services.” p. 20, ¶ 47 (emphasis added).
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Key Issues in TCPA Class Certification
• State statutes barring class actions for statutory damages or penalties
• Superiority/suitability • Consent/waiver • Picking Off/Mootness
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No Class Actions for Statutory Penalties?
• N.Y. C.P.L.R. § 901(b) (no class actions for statutory penalties). • Shady Grove Orthopedic Associates, P.A. v. Allstate Ins. Co., 130 S.
Ct. 4131 (2010) (§ 901(b) is a procedural rule not applicable in federal courts sitting in diversity jurisdiction).
• 47 U.S.C. § 227(b)(3) gives rise to a private right of action “if otherwise permitted by the laws or rules of court of a State.”
• Holster v. Gatco, Inc., 618 F.3d 214 (2d Cir. 2010) (§ 227(b)(3) is “a delegation by Congress to the states of considerable power to determine which causes of action lie under the TCPA” and therefore § 901(b)’s prohibition on statutory penalty class actions applies in TCPA cases as a matter of federal law).
• Mims v. Arrow Fin. Servs., LLC, 132 S. Ct. 740, 745 (2012) (federal question jurisdiction exists over TCPA claims).
• Most federal courts following Mims interpret it as implicitly overruling Holster. E.g., Bais Yaakov of Spring Valley v. Peterson’s Nelnet, LLC, Civ. No. 11-00011 (D.N.J., Oct. 27, 2012) (collecting cases). But see Bank v. Independence Energy Group LLC, No. 1:12-cv-01369 (E.D.N.Y., March 11, 2013) (dismissing based on § 901(b)), vacated and remanded, 13-1746-cv (2d Cir. Dec. 3, 2013). 34
Superiority/Suitability
• Know your jurisdiction. – TCPA precedent (may not be dispositive because many jurisdictions are split) – Local small claims procedures
• Class actions not superior given availability of statutory damages – Local Baking Prods., Inc. v. Kosher Bagel Munch, Inc., 421 N.J. Super. 268,
23 A.3d 469, 473–77 (N.J. Super. Ct. App. Div. 2011) (summarizing cases from various jurisdictions and holding that class actions were not superior because a small claims case can be brought in NJ for far less than $500).
• Superiority can be met in TCPA cases – A&L Industries Inc. v. P. Cipollini Inc., No. 2:12-cv-07598 (D.N.J. Oct. 2,
2013) (unpublished) (criticizing Local Baking Products and citing contrary federal cases).
– Reliable Money Order, Inc. v. McKnight Sales Co., Inc., 281 F.R.D. 327 (E.D. Wis. 2012) (reaching opposite conclusion based in part on the absence of express statutory language precluding class actions).
• The argument that potentially annihilating exposure makes class action not superior is out of favor – See, e.g., Critchfield Physical Therapy v. Taranto Group, Inc., 263 P.3d 767
(Kan. 2011). 35
Consent as an Individualized Issue of Fact
• General standard – In TCPA actions, “class certification is warranted only when the ‘unique facts’ of a
particular case indicate that individual adjudication of the pivotal element of prior express consent is unnecessary.” Connelly v. Hilton Grand Vacations Co., LLC, --- F.R.D. ----, 2013 WL 5835414, *2 (S.D.Cal. Oct. 29, 2013) (holding that variations in circumstances in which customers provided cell phone numbers precluded classwide determination of consent issues) (quoting Gene & Gene LLC v. BioPay LLC, 541 F.3d 318, 326 (5th Cir. 2008)).
• Class certification denied – E.g., Balthazor v. Central Credit Services, Inc., et al., No. 10-62435-CIV, 2012 WL
6725872 (S.D. Fla., Dec. 27, 2012) (holding that providing a telephone number to a debt collector can be consent to call that number, and summarizing cases coming to similar conclusion).
• Class certification granted – E.g., Meyer v. Portfolio Recovery Associates, LLC, 696 F.3d 943 (9th Cir. 2012) (as
amended) (FCC rule requires express consent in advance and the defendant “did not show a single instance where express consent was given before the call was placed”).
• Wrong number as a defense? – Soppet v. Enhanced Recovery Co., LLC, 679 F.3d 637 (7th Cir. 2012) (consent applies to
the person, not the number). – See Fini v. Dish Network L.L.C., --- F. Supp. 2d ----, 2013 WL 3815627, *8 (M.D. Fla. Mar.
6, 2013) (finding a question of fact about whether the plaintiff or her husband was the “actual” recipient of the call).
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Consent as an Individualized Issue of Fact • Practical questions:
– Is it possible to distinguish those who consented from those who didn’t?
– How do you tell if the call was to the person who consented?
– To which of the consenting consumer’s phones was the call made?
– When was the telephone number obtained? – How was the telephone number obtained? – Who answered the phone? – Was the call for debt collection purposes or
marketing purposes? – Was the call to a cell phone or to a land line?
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Picking Off/Mootness
• Damasco v. Clearwire Corp., 662 F. 3d 891 (7th Cir. 2011) – pre-certification offer of judgment to named
plaintiff moots case but discussing circuit split. • Genesis HealthCare Corp. v. Symczyk, No.
11-1059 (Apr. 16, 2013) – It’s moot if it’s moot. – Mootness question left to the lower courts.
• Diaz v. First American Home Buyers Protection Corp. (9th Cir. Oct. 4, 2013) – Offer of judgment does not moot claim.
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Other Issues
• Due process – Alternative to superiority argument when there is potential “annihilating”
liability. – May not be ripe until after class certification or even until after judgment.
See Parker v. Time Warner Enter. Co., 331 F.3d 13, 21-22 (2d Cir. 2003). • Numerosity/Ascertainability
– May be an issue in third party/agency cases. – Does the defendant have custody or control over agent’s data?
• Exemptions from TCPA – Noncommercial calls (political organizations, nonprofits) to land lines. – Note the differences between land lines and cell phones.
• Standing – Cellco Partnership v. Wilcrest Health Care Management Inc., No. 09-3534,
2012 WL 1638056 (D.N.J. 2012) (businesses that were not intended recipients not within the zone of interests protected).
• Text messaging
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Practical Considerations
• CAFA – Do you really want to remove? • Settlement – Don’t assume plaintiffs’
counsel is holding out for a huge payday. • E-discovery – Preservation of recordings,
consent data – failure to preserve could result in sanctions affecting class certification defenses.
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TCPA Class Actions: Phone, Text and Fax Solicitation Claims on the Rise
Strafford Webinar: December 19, 2013
Justin T. Winquist [email protected]
Who Can Be Held Liable Under the TCPA?
Options based on statutory text (excluding faxes): • Person who “makes” a call using auto-dialing, artificial, or
prerecorded voice to emergency lines, certain health care guest rooms, or number assigned to paging services, cell phones, or other services where called party is charged. 47 U.S.C. § 227(b)(1)(A).
• Person who “initiates” a call to a residential telephone line using an
artificial or prerecorded voice to deliver a message without prior consent. § 227(b)(1)(B).
• Entity that the call is made “by” or “on behalf of,” where the
recipient received more than one call in a 12-month period and the calls violate the “Do Not Call” Registry rules. § 227(c)(5); 47 C.F.R. § 64.1200(c).
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Source of Confusion
TCPA facially creates vicarious liability for some violations, but not others: • Auto-dialing and prerecorded voice violations are prohibited under §
227(b)(1) and privately actionable under § 227(b)(3). Subsection 227(b) does not contain any “on behalf of” language. Plain language attaches liability to party who “makes” or “initiates” the call.
• Subsection 227(c)’s private right of action provision contains “on behalf of” language, but facially creates right of action only for 227(c) violations, i.e., “Do Not Call” Registry violations.
• Nevertheless, courts and FCC have read vicarious liability into § 227(b) on various theories.
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Theories of Vicarious Liability
Courts and FCC have read vicarious liability into TCPA as a whole, despite § 227(b) language, based on: • Agency-Based Vicarious Liability: To effectuate the TCPA’s purpose,
or under applicable common-law principles, traditional agency principles of consent and control apply to impose vicarious liability.
• On Behalf of Liability: Liability attaches to the person on whose behalf the call is made. The question then becomes, what does “on behalf of” mean?
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Strict “On Behalf Of” Liability?
• Mey v. Pinnacle Sec., LLC, 2012 WL 4009718, at *3 (N.D. W.Va. 2012): – Plaintiff “acknowledges the differences in the language of the two right of action
sections [§ 227(b) v. 227(c)] . . . but asserts that § 227(b)(3) nonetheless provides for ‘on behalf of’ liability, because to find otherwise would be to frustrate Congress's purpose behind the TCPA.”
– “[T]his Court cannot ignore the obvious difference in language between § 277(c)(5)
and § 227(b)(3). With regard to the right of action created under subsection (c), Congress specifically provided for strict ‘on behalf of’ liability, but in creating a right of action for violations of subsection (b), it notably made no mention of such strict liability.”
– “Accordingly, this Court finds that the TCPA does not provide strict ‘on behalf of’
liability under § 277(b)(3).”
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Petition for FCC Declaratory Ruling
• The three approaches advanced by commentators in CG Docket No. 11-
50, Dish Network, LLC Petition for Declaratory Ruling Concerning The Telephone Consumer Protection Act mirror the options in the case law:
– No vicarious liability at all. Liability attaches only to the party that “makes” or “initiates”
the call;
– Vicarious liability attaches under federal common law of agency. The relevant inquiry involves more than asking if the principal will “benefit” from the call, and looks to “whether the principal controls or has the right to control the manner and means of the agent’s performance or work;”
– Strict, “on behalf of” liability. Liability would attach to the entity that “benefits from” the
action of the caller, regardless of whether the entity directed—or even knew—that the call was being made.
• FCC matter was pending since April 2011. The FCC released a
Declaratory Ruling on these questions on May 9, 2013…
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May 9, 2013 FCC Declaratory Ruling
• In the Matter of the Joint Petition Filed by Dish Network, LLC, the United States of
Am., & the States of California, Illinois. N. Carolina, & Ohio for Declaratory Ruling Concerning the Tel. Consumer Prot. Act (TCPA) Rules, 28 F.C.C.R. 6574 (2013):
– “[W]e clarify that while a seller does not generally “initiate” calls made through a third-
party telemarketer within the meaning of the TCPA, it nonetheless may be held vicariously liable under federal common law principles of agency for violations of either section 227(b) or section 227(c) that are committed by third-party telemarketers.”
– “The classical definition of “agency” contemplates “the fiduciary relationship that
arises when one person (a ‘principal’) manifests assent to another person (an ‘agent’) that the agent shall act on the principal’s behalf and subject to the principal’s control. Potential liability under general agency related principles extends beyond classical agency, however. A principal may be liable in circumstances where a third party has apparent (if not actual) authority . . . [and] a seller may be liable for the acts of another under traditional agency principles if it ratifies those acts by knowingly accepting their benefits.”
– “A number of parties argue that statutory “on behalf of” liability extends beyond agency principles to subject the seller to vicarious liability for violations of both section 227(c) and section 227(b) so long as the call is made simply to aid or benefit the seller – even if agency principles would not impose vicarious liability on the seller for the call. We reject these contentions for purposes of this declaratory ruling proceeding”.
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Case Law Applying Declaratory Ruling Guidance
• Smith v. State Farm Mut. Auto. Ins. Co., 2013 WL 5346430 (N.D. Ill. Sept.
23, 2013):
– Plaintiff alleged that State Farm violated Section 227(b) by initiating “one or more unsolicited, unattended, autodialed prerecorded voice calls” to her cell phone. Calls were placed by a lead-generating firm that was engaged by an exclusive agent of State Farm.
– State Farm filed a 12(b)(6) motion to dismiss, arguing that the Plaintiff alleged only that
she received a call from a lead generator, and not a call from State Farm itself. State Farm argued that the Plaintiff failed to state a claim because she failed to plead facts plausibly supporting any vicarious liability
– Court cited the May 9, 2013 FCC Declaratory Ruling for the proposition that “a seller
may be held vicariously liable for violations under a broad range of agency principles, including not only formal agency, but also principles of apparent authority and ratification.”
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Case Law Applying Declaratory Ruling Guidance
• Smith v. State Farm Mut. Auto. Ins. Co., 2013 WL 5346430 (N.D. Ill. Sept.
23, 2013): – Court dismissed the complaint, without prejudice: – As to formal agency, the court concluded that the Plaintiff “has sufficiently alleged that
State Farm had a formal agency relationship with its own insurance agents, and that [the lead-generating firm] acted as the insurance agent's agent, but she has failed to sufficiently connect these two relationships. She, therefore, has not sufficiently pled that [the lead-generating firm] was State Farm's agent rather than just an agent of State Farm's insurance agents.”
– As to apparent authority, the court concluded that the Plaintiff “alleged—that State
Farm ‘allowed its agents to market using its trade name and trade mark. . .’ [but] has not alleged that [the lead-generating firm]—rather than State Farm's own agents—had authority to use State Farm's trade name or mark. . . Notably, according to [Plaintiff’s] allegations, [the lead-generating firm] did not even mention State Farm's name during the call at issue.”
– As to ratification, the court concluded that Plaintiff did “not even allege that State Farm
knew that [the lead-generating firm] was making prerecorded calls. She also does not allege that State Farm knew that its insurance agents generated business through [that firm], by robocalls or any other means. Furthermore, she has not alleged any benefit that State Farm accepted as a result of the phone call placed to [Plaintiff].”
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May 9, 2013 FCC Declaratory Ruling Applies to Faxes
• Savanna Grp., Inc. v. Trynex, Inc., 2013 WL 4734004 (N.D. Ill. Sept. 3, 2013):
– Unsolicited fax case. – Court reasoned that “[u]nder the Hobbs Act, the Court must apply a final FCC order if it
governs the matter at issue.” (citing 28 U.S.C. § 2342(1)). – Court noted that May 9, 2013 FCC Declaratory Ruling “specifically addressed the
status of ‘sellers’ within the telemarketing context, not ‘senders’ within the faxing context.”
– Court concluded that “[g]iven the substantial similarity between the definitions of
“seller” and “sender” and the broad language of the ruling concerning violations of § 227(b), the ruling is controlling in this case.”
– Thus, Savanna Group indicates that courts will apply the FCC’s agency standard of
vicarious liability to fax cases.
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