Reilly to Speak on TCPA Class Action, Jan. 20
Christine Reilly, partner and co-chair of Manatt’s TCPA compliance and class action defense practice, will speak at PLI’s Advanced Data Privacy, Cybersecurity Breach and TCPA Class Action Litigation Strategies and Defenses 2017 course. Christine will participate in “TCPA Class Action Litigation Roundtable,” covering trends in standing, motion practice, class certification and settlement, as well as the latest FCC regulations that impact class action litigation. The course will take place on January 20, 2017, in San Francisco and via live webcast. For more information, click here.
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Defendant’s Attempt to Moot TCPA Suit Fails (Again)
A Telephone Consumer Protection Act defendant was unsuccessful in persuading a Massachusetts federal court judge to dismiss a putative class action under the statute despite offering the plaintiff $46,500 and promising to refrain from future violations.
The dispute began when Bais Yaakov of Spring Valley, a religious corporation operating a private school in New York, sued college and career planning company ACT Inc. It asserted that the defendant sent illegal fax advertisements in 2012 without the required opt-out notice. ACT responded with an offer of judgment pursuant to Rule 68 of the Federal Rules of Civil Procedure. The plaintiff did not accept within 14 days and the offer expired.
ACT then moved to dismiss for lack of subject matter jurisdiction, arguing that its unaccepted offer of judgment rendered the case moot by negating the existence of a case or controversy. Bais Yaakov told the court its claims had not been satisfied because it had not accepted the offer. The court denied the motion and the First Circuit Court of Appeals affirmed.
The U.S. Supreme Court then issued its decision in Campbell-Ewald Co. v. Gomez, holding that an unaccepted offer to satisfy the named plaintiff’s individual claim was not sufficient to render a case moot, when the complaint sought relief on behalf of the plaintiff and a class of persons similarly situated.
However, in concurring and dissenting opinions, Chief Justice John Roberts and Justices Antonin Scalia, Clarence Thomas, and Samuel Alito stated that tendering a check or depositing one with the district court would moot a plaintiff’s individual claims. The next day, ACT filed a motion to deposit $4,800 with the district court as payment to the plaintiff to resolve all claims in the lawsuit and filed a second motion to dismiss.
Plaintiff’s counsel returned the check to defendant’s counsel and the court denied the motion. While ACT argued that the check was for the maximum amount Bais Yaakov could recover ($1,500 per fax under the TCPA and $100 per fax under New York state law), the court said the proper measure of damages for the plaintiff’s claims remained in dispute, leaving the parties with a live controversy.
In its third effort, ACT tendered to Bais Yaakov a certified check on June 13, 2016, in the amount of $45,600: $15,000 per fax for violations of the TCPA and $200 per fax for violations of New York law. The defendant also agreed to cease sending any faxes to the plaintiff that would violate either law. Plaintiff’s counsel again returned the check to defendant’s counsel.
ACT filed its third motion to dismiss, arguing that no justiciable case or controversy existed. Campbell-Ewald left open the question of whether a tender of full payment, rather than a withdrawn offer under Rule 68, will moot a case, the defendant told the court, adding that its most recent check is unconditional, will not expire, and indisputably covered the total amount of damages to which plaintiff could be entitled.
U.S. District Court Judge Timothy S. Hillman agreed that Bais Yaakov no longer has a live individual claim based on the $45,600 check. As for the “thornier issue” of whether the class action remained justiciable, the court noted First Circuit precedent that “a putative class action ‘ordinarily must be dismissed as moot if no decision on class certification has occurred by the time that the individual claims of all named plaintiffs have been fully resolved.’ ”
“However, a narrow exception to this rule has been carved out,” Judge Hillman added. “[W]here a named plaintiff’s individual claim becomes moot before the district court has an opportunity to rule on the certification motion, and the issue would otherwise evade review, the certification might ‘relate back’ to the filing of the complaint.” The relation-back doctrine applies when “other persons similarly situated” will continue to be subject to the challenged conduct and the claims raised are “so inherently transitory” that the trial court will not have enough time to rule on a motion for class certification before the proposed representative’s individual interest expires.
TCPA defendants have employed a “recurring strategy” of picking off named plaintiffs before class certification, the court said, and ACT’s “nifty stratagem” implicated the “inherently transitory” standard of the relation-back doctrine. “Accordingly, I find that although Plaintiff’s individual claims have become moot, a justiciable controversy remains,” Judge Hillman concluded.
To read the memorandum and order in Bais Yaakov of Spring Valley v. ACT, Inc., click here.
Why it matters: For the third time, the district court denied ACT’s motion to dismiss the TCPA suit. While the defendant successfully mooted the plaintiff’s individual claims with its $45,600 check and promise not to violate the statute in the future, the court said the “relation-back” doctrine prevented dismissal of the suit because the claims of class members remained a justiciable controversy.
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Second Circuit: Entry of Judgment Mooted Individual and Class Claims
In contrast to a recent decision from a Massachusetts federal court, the Second Circuit Court of Appeals ruled that an entry of judgment satisfying a Telephone Consumer Protection Act plaintiff’s individual claims also mooted the class claims.
The case involved Todd Bank, a pro se putative class action TCPA plaintiff. Defendant Alliance Health Networks provided a check to the court and filed a motion to dismiss, arguing that the action was moot.
A district court judge agreed and Bank appealed, arguing that the satisfaction of the judgment on his individual claims did not deprive the court of subject matter jurisdiction over his class action claims. In a summary order, the Second Circuit disagreed.
In Campbell-Ewald v. Gomez, the U.S. Supreme Court held that an unaccepted offer made pursuant to Rule 68 of the Federal Rules of Civil Procedure, on its own, will not moot a plaintiff’s claims.
“But where judgment has been entered and where the plaintiff’s claims have been satisfied, as they were here when Bank negotiated the check, any individual claims are rendered moot,” the unanimous three-judge panel wrote.
The Second Circuit has not previously addressed whether, in all cases, the rendering moot of a plaintiff’s individual claims undermines the plaintiff’s standing to pursue claims on behalf of a putative class, leaving open the question whether unresolved class action claims can ever provide an independent basis for justifiability.
“However, because Bank lacks any connection to a ‘live claim of h[is] own,’ or any cognizable interest in pursuing the class claims,” the panel again declined to answer the question beyond the case at hand. Bank was the sole individual representative for the putative class and “once his claim was no longer live, no plaintiff remained in a position to pursue the class claims,” the court said.
Several circumstances exist where the basis of an associated class action will not be undermined when a named plaintiff’s individual claim has been rendered moot. Since none of those circumstances were present in Bank’s case, the court rejected the relation-back doctrine recently relied upon by a Massachusetts federal court judge in a similar case. “[A]bsent a class certification decision or any other reason to link Bank’s once-live claim to the now-independent class claims, that line of cases is simply inapplicable,” the panel said.
Bank also argued that he still had a personal stake in the class action litigation—and therefore standing—because he could receive an incentive award as representative of the putative class. “Ordinarily, standing requires that a plaintiff allege a concrete injury that creates a legally-protected interest in pursuing the litigation,” the Second Circuit wrote. “A purely hypothetical possibility of recovery is not sufficient to meet the requirements for standing.”
The plaintiff admitted that such awards are not automatic and are within the discretion of the court. “Since these awards are not guaranteed and are dependent on the district court’s approval after the class is certified and a recovery occurs, they are not sufficiently concrete to meet the standing requirements,” the panel said. “Moreover, there was never even a determination as to whether there might be a cognizable class in this case, as Bank never moved for class certification. Therefore, Bank has not maintained the standing necessary to pursue the putative class claims.”
To read the summary order in Bank v. Alliance Health Networks, click here.
Why it matters: While issued in the form of a summary order, the Second Circuit decision provides valuable case law for TCPA defendants to cite for support. It also reaffirms the method proposed by Chief Justice John Roberts and Justices Antonin Scalia, Clarence Thomas, and Samuel Alito in concurring and dissenting opinions in Campbell-Ewald, suggesting that tendering a check or depositing one with the district court would moot a plaintiff’s claims.
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FCC: Robotexts Must Comply With TCPA
Autodialed text messages, or robotexts, are covered by the Telephone Consumer Protection Act and must comply with the requirements of the statute, the Federal Communications Commission said in a new Enforcement Advisory.
Intended “to promote understanding of the clear limits on the use” of such messages, the Enforcement Bureau’s Advisory noted that the agency has previously stated that the restrictions on making autodialed calls to cell phones encompass both voice calls and texts, most recently in last year’s Declaratory Ruling and Order.
With this principle in mind, the agency reiterated that the TCPA places limits on autodialed calls and prerecorded or artificial voice calls to wireless numbers, as evidenced by the FCC rules restricting the use of prerecorded voice calls and automatic telephone dialing systems, including those that deliver robotexts.
Specifically, autodialed calls or text messages require the prior express consent of the called party unless the calls or messages are made for emergency purposes, are free to the end user and have been exempted by the Commission, or are made solely to collect debts “owed to or guaranteed by the United States” pursuant to the Bipartisan Budget Act of 2016.
The burden of proving consent rests with the party making the call or text, the FCC said, even for text messages sent from text messaging apps. For autodialed texts that include or introduce an advertisement, prior express written consent is required, except in certain limited circumstances.
“The fact that a consumer’s wireless number is in the contact list of another person’s wireless phone does not, by itself, demonstrate consent to receive robotexts,” the FCC wrote. “Further, recipients may revoke their consent at any time using any reasonable method.”
Senders may send one final autodialed text to confirm a recipient’s opt-out request, the agency acknowledged, and when a cell phone number has been reassigned to another party, the caller is not liable for the first call or text going to the called party who did not provide consent. The caller, however, is liable for any continued calls or texts to a reassigned number.
“Robotext violations are subject to enforcement by the FCC, including forfeiture penalties up to $18,936 per violation, and state enforcement agencies,” the Advisory cautioned.
Why it matters: A warning for advertisers and marketers, the Enforcement Advisory signals that the agency will be keeping a close eye on robotexts. “The FCC’s Enforcement Bureau will rigorously enforce the important consumer protections in the TCPA and our corresponding rules,” the Commission wrote. “We expect this Advisory will facilitate compliance with the law and rules by those who initiate robotexts to mobile devices.”
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Despite Plaintiff’s Initiation of Contact, California Court Moves TCPA Suit Forward
Despite the fact that the plaintiff voluntarily initiated contact with the defendant, a California federal court denied the company’s motion to dismiss the plaintiff’s subsequent Telephone Consumer Protection Act suit.
Harman Management Corporation ran a telemarketing campaign in 2012 to provide coupons for restaurant food items via text messages. Seeking a free A&W Papa Burger Single, California resident Cory Larson texted the word “BURGER” to the SMS short code licensed and operated by the defendant.
In response, Larson received a message related to the burger as well as a text informing him that he had signed up for the company’s mobile alert program and could receive up to 30 messages per month, with the ability to opt out by texting “STOP” to cancel. Larson did not elect to stop receiving messages and continued to receive texts through February 2016.
Larson filed suit alleging that the defendant (and the company that worked on the ad campaign) violated the TCPA because the subsequent messages he received were not related to his original “BURGER” text. For example, one message read “A&W: Gobble Up! First 5,000 will receive Reg. Sized Chili Cheese Fries for 99 cents! Limit1.Delete@reg.Exp11/30 Valid@particip. A&Ws in UT,CA,CO,WA. TextSTOPtoEnd.”
The defendants moved to dismiss the putative class action, arguing that the plaintiff initiated contact by requesting to receive the texts, and indicated his consent. In addition, Larson had the opportunity to stop receiving text messages at any time but failed to do so, the defendants told the court.
But U.S. District Court Judge Dale A. Drozd disagreed.
He framed the question as whether the text messages from the defendants constituted an advertisement or telemarketing, and if so, whether the plaintiff’s initial “BURGER” message satisfied the TCPA’s requirement of prior express written consent.
As defined by the statutory regulations, an “advertisement” means “any material advertising the commercial availability or quality of any property, goods, or services,” while “telemarketing” is “the initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services, which is transmitted to any person.”
At least two of the messages received by Larson from the defendants constituted advertising, the court said, including the chili cheese fries deal. “These messages plausibly appear to both advertise the availability of and encourage the purchase of particular goods at A&W Restaurants,” the judge wrote. “Thus, plaintiff has sufficiently alleged a claim that he received text messages constituting advertisement or telemarketing from defendants.”
Was Larson’s initial text message sufficient to satisfy the need for prior express written consent? No, Judge Drozd said.
“[S]uch a message alone fails to establish the existence of a ‘prior express written consent’ as that term is defined by the FCC’s regulation,” the court said. “Apart from the text message being ‘in writing,’ the message as alleged by plaintiff neither included his signature nor clearly authorizes defendants to deliver advertisements or telemarketing messages using an automatic telephone dialing system. Because plaintiff has pled sufficient facts to support an inference that defendants failed to obtain his prior express written consent prior to receiving additional text messages, this court cannot dismiss plaintiff’s claims.”
The court also rejected the defendants’ suggestion that it take a “common sense” approach to the issue. “[D]efendants contend generally that their promotional campaign, which provided an opt-out procedure, is not the type of situation the TCPA was intended to address because it did not ‘mislead, harm, or harass consumers,’” Judge Drozd wrote. “The court is unpersuaded by this argument.”
To read the order in Larson v. Harman Management Corporation, click here.
Why it matters: The denial of the defendant’s motion to dismiss the class action serves as a warning to advertisers that courts may take a very narrow reading of what constitutes “prior express written consent” and hold companies to the boundaries of their original promotion, even where a plaintiff initiated contact with the defendant and ignored opt-out notices.
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News and Views
Law360 quoted Manatt’s Christine Reilly, co-chair of the firm’s TCPA compliance and class action defense practice, for an article about the U.S. Supreme Court’s landmark ruling in Spokeo v. Robins that has wreaked havoc on the lower courts over the last six months. “What we're seeing now is that complaints are being filed that cite various injuries such as depletion of battery life, waste of time and energy, invasion of privacy,” Reilly said. “And because allegations in the complaint at the pleading stage must be taken as true, if a plaintiff does a good enough job of throwing out various types of alleged injuries, that makes it difficult, although not impossible, for the defense side to be successful on their Spokeo arguments.” To read the full article, “Spokeo Split: How High Court's Ruling Is Being Interpreted,” click here.
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