BREAKING: SCOTUS Rules on Spokeo, Significant Implications for TCPA Cases
The Supreme Court of the United States ruled yesterday in Spokeo, Inc. v. Robins that a plaintiff must show an injury in fact before pursuing a claim for violation of the federal Fair Credit Reporting Act (FCRA), a holding that could have major repercussions for consumer plaintiffs pursuing claims under a wide variety of consumer protection statutes, including the Telephone Consumer Protection Act. The 6-2 decision authored by Justice Samuel Alito may be found here. Justice Clarence Thomas wrote a concurring opinion, while Justice Ginsberg dissented, with Justice Sotomayor joining that dissent.
Far beyond its FCRA aspects, the decision may have broad and long-lasting repercussions for the entire consumer class action bar. There are literally hundreds of putative class action lawsuits in which plaintiffs allege a mere technical violation of a federal consumer protection statute without pleading facts showing any actual injury. For example, plaintiffs pursuing claims under the TCPA have repeatedly pursued and obtained large class settlements based on mere technical violations, such as the receipt of electronic versions of a blast fax. It may likewise be particularly relevant in the privacy and data security area, where such statutory damages cases predominate. In addition, the decision may constrict plaintiffs' ability to certify a class under the requirements of Federal Rule 23 in that, as just one example, plaintiffs may have a more difficult time demonstrating common types of actual injury.
The Spokeo case pits a consumer against a "people search engine" firm that performs a computerized search of various databases for public data. When a search for plaintiff produced a variety of inaccurate data, that plaintiff brought suit, alleging FCRA violations despite pleading no facts showing any resulting harm. Among other things, FCRA seeks to ensure "fair and accurate credit reporting." 15 U.S.C. § 1681(a)(1). The statute therefore regulates the creation and use of "consumer report[s]" by "consumer reporting agenc[ies]" for certain specified purposes, including credit transactions, insurance, licensing, consumer-initiated business transactions and employment. The suit alleges that Spokeo is a "consumer reporting agency" and therefore is liable as a defendant under the act. Nowhere in the complaint, however, does plaintiff explain what injuries were caused by the inaccurate data or how he even became aware of the inaccuracies.
Under Article III, a plaintiff invoking federal jurisdiction must first establish standing by demonstrating (1) an injury in fact, (2) that is fairly traceable to the challenged conduct of defendant, and (3) that is likely to be redressed by a favorable judicial decision. Judge Alito noted, citing a 1992 Supreme Court decision, that this includes the requirement that plaintiff show "an invasion of a legally protected interest" that is "concrete and particularized" and "actual or imminent, not conjectural or hypothetical." As the Court puts it, a "concrete" injury must be "de facto"; that is, it must actually exist. In Spokeo, the Court concludes that the U.S. Court of Appeals for the Ninth Circuit, in reversing a dismissal at the trial court level, failed to consider the "concreteness" portion of the analysis, and likewise failed to consider whether the alleged FCRA procedural violations entail a degree of risk sufficient to meet such requirement and remanded the case for further consideration of this issue.
As applied to Robins, the Court notes with concern that plaintiffs must do more than establish a technical or procedural violation of FCRA. "On the one hand, Congress plainly sought to curb the dissemination of false information by adopting procedures designed to decrease that risk. On the other hand, Robins cannot satisfy the demands of Article III by alleging a bare procedural violation. A violation of one of the FCRA's procedural requirements may result in no harm. For example, even if a consumer reporting agency fails to provide the required notice to a user of the agency's consumer information, that information regardless may be entirely accurate. In addition, not all inaccuracies cause harm or present any material risk of harm. An example that comes readily to mind is an incorrect zip code. It is difficult to imagine how the dissemination of an incorrect zip code, without more, could work any concrete harm."
In a dissent, Justice Ginsberg argues that the Court ignores multiple high court rulings where the terms "concrete" and "particularized" have been joined, and that plaintiff Robins' pleadings "allegations carry him across the threshold" of pleading such injury. On the facts, the dissent argues that the allegations go far beyond the incorrect zip code hypothetical. Ginsberg asserts that Robins established more than just a bare procedural violation because the misrepresentations of his status arguably created the erroneous impression that he was overqualified, that he might be unwilling to relocate or that his salary demands would exceed what prospective employers were prepared to offer him. Justice Sonia Sotomayor joined in the dissent.
This decision has significant implications for TCPA cases and compliance. Plaintiffs that are unable to demonstrate concrete harm arising from a violation of the TCPA may be foreclosed from bringing claims under the statute in federal court. Members of Manatt's TCPA Compliance and Class Action Defense practice are continuing to digest the court's decision and its implications on the TCPA. For further information on this decision, please contact the editors of this newsletter noted above.
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Manatt Expands National Financial Services and TCPA Litigation Practice
Preeminent consumer financial services lawyer Richard E. Gottlieb has joined the Los Angeles office of Manatt as a litigation and government enforcement partner in the multidisciplinary Financial Services practice. Gottlieb is widely known as one of the country's top consumer financial services litigators. He counsels and defends clients, including banks, mortgage lenders, servicers, finance companies, student lenders, marketplace and peer-to-peer lenders, retailers, insurers, and others, on a wide array of litigation and enforcement matters.
In addition to handling countless financial services litigation matters, he has also successfully defended multiple putative TCPA consumer class actions, and is coauthor of the TCPA and Telemarketing Sales Rule chapter in the Consumer Financial Services Answer Book, a leading desk reference published annually by the Practising Law Institute.
Highly regarded for his work, Gottlieb is recognized by Chambers USA as one of only 15 "Leading Lawyers" in the category of Financial Services Regulation: Consumer Finance Litigation. He is a fellow of the prestigious American College of Consumer Financial Services Lawyers and the American College of Mortgage Attorneys. Gottlieb is a prolific author, lecturer and commentator in the media on financial services, data privacy and other related issues. He has been a guest on both NBC Nightly News and National Public Radio's All Things Considered.
Gottlieb earned his B.A. from Vanderbilt University, his J.D. from State University of New York and his LL.M. from Georgetown University.
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SPECIAL FOCUS: FCC Proposes Rules for Debt Collection Call Exemption Under 2015 Budget Act
By Marc Roth
On May 4, 2016, the FCC Commissioners voted to commence a rulemaking proceeding pursuant to an amendment to the Telephone Consumer Protection Act that created a carve-out for calls made in connection with "a debt owed to or guaranteed by the United States" from the TCPA's general prohibition against automated calls. This amendment, which Congress included in the Bipartisan Budget Act of 2015 (Budget Act) last summer, directs the FCC to adopt regulations for the exemption and, in its discretion, to "restrict or limit the number and duration" of permissible government-backed debt collection calls. The following is a summary of the FCC's Notice of Proposed Rulemaking (NPRM) that was published on May 6, the full text of which is available here.
Types of Calls Covered. The FCC proposes to limit the exemption to calls made for the purpose of obtaining payment after the borrower is delinquent or for "debt servicing." The FCC recognizes that debt servicing calls may provide debtors with a valuable service by offering information about options and programs to avoid defaulting or becoming delinquent. As such, the NPRM seeks comment on this proposal. The FCC also seeks comment on whether the exemption should be limited to calls made after the debtor is in default rather than when the debtor becomes delinquent.
Defining Eligible Debts. In addition to debts owed to or guaranteed by the U.S. government, the FCC seeks comments on whether the exemption should (i) also cover debts insured by the United States, (ii) apply if the debt is transferred to a person other than the U.S. government or if the collection agency remits only a percentage of the funds collected, and (iii) cover other types of loans, such as federal student loans, small business loans and federal guaranteed mortgages.
What Parties Are Covered by the Exemption? The FCC proposes that the exemption would exempt calls made by creditors of the owed debts and their agents. The NPRM seeks comment on whether it should adopt this approach or consider a narrower or broader interpretation under the Budget Act exemption.
Who Can Be Called? The FCC proposes to limit the exemption to calls made to the person or persons obligated to pay the debt at issue. As such, calls made to the debtor's family, friends, and neighbors would not be subject to the carve-out. Consistent with the FCC's July 2015 ruling that calls made to wrong or reassigned mobile numbers violate the TCPA (subject to the "one call" safe harbor), the NPRM does not extend the Budget Act exemption to these calls.
Limits on Calls. As noted above, the Budget Act empowers the FCC to place restrictions on calls covered by the exemption, including the frequency and duration of the calls. The FCC proposes to limit the exemption for autodialed calls with a prerecorded message to three calls per account delinquency, regardless of whether the call was actually answered. The NPRM also seeks comment on whether live-agent calls are preferable to and should be treated differently than prerecorded messages. Additionally, the NPRM seeks comments on whether placing a limit on the duration of an exempt call is appropriate.
Interaction with Other Laws. The FCC seeks comments on how and whether the exemption impacts federal and state debt collection laws, such as the Fair Debt Collection Practices Act.
Stopping Calls. The FCC proposes to allow debtors the right to stop receiving covered calls at any time and for callers to inform them of this right. The FCC also proposes to extend a stop request made for one collection attempt to all subsequent efforts, even if the debt was transferred to a new collector.
Comments are due to the FCC by June 6, 2016.
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What Is a Residential Line Under the TCPA? FCC to Decide
The Federal Communications Commission intends to define the term "residential telephone line" as used in the Telephone Consumer Protection Act and implementing regulations in response to a petition for declaratory judgment.
Section 227(b)(1)(B) of the TCPA generally makes it unlawful for any person to "initiate any telephone call to any residential telephone line using an artificial or prerecorded voice … without the prior express consent of the called party."
A New York attorney, Todd C. Bank, filed suit against Independence Energy Group over allegedly illegal calls to what he characterized as his residential line. The defendant moved for summary judgment arguing that Bank actually used the phone line for business purposes and it was therefore not covered by the TCPA's prerecorded call restrictions.
Bank used the number as his law office telephone number in pleadings and court filings, in professional correspondence, on his business card, and on his attorney registration form with the court system, the defendant told the court. It also appeared as his contact number in an attorney directory and an identifying number on tax returns for his law practice.
The court granted summary judgment in favor of the defendant, holding that "no reasonable juror could find that the [telephone number] is residential" and that "Bank held out the [telephone number] to the public as a business line." Bank appealed to the Second Circuit Court of Appeals.
While the appeal was pending, Bank then filed a petition for a declaratory judgment asking the FCC to clarify the definition of a "residential telephone line." Specifically, Bank requested that the Commission establish a bright-line rule and declare that Section 227(b)(1)(B) applies with equal force to home-business telephone lines that are registered with the telephone service provider as residential lines.
"This clarification is consistent with the TCPA's purposes and the Commission's orders implementing the statute," Bank argued in his petition. "It would also serve the public interest by enabling individuals who work from home to use their registered residential telephone lines without having to be harassed in the various manners that the TCPA prohibits."
The language of the statute is clear, Bank added: the prohibition does not apply to "some" residential telephone lines but to "any" residential telephone line, without restriction or limitation. Further, the TCPA is a strict liability statute, he argued, and an objective, bright-line test is necessary to avoid extensive discovery in every single lawsuit and avoid uncertainty in the law.
In response, the FCC asked for public comment on the issue. Specifically, the Commission queried whether it should "(1) establish such a bright-line test for identifying a 'residential line' under the prohibition against unconsented-to calls using an artificial or pre-recorded voice, (2) adopt some other bright-line test to identify such lines, or (3) identify some other method, such as a multi-factor analysis, for determining whether a telephone line is a 'residential line' for purposes of the artificial/prerecorded voice call prohibition."
The Commission also filed an amicus brief in the case pending before the Second Circuit, suggesting that the federal appellate panel grant a stay in the litigation and hold the case in abeyance pending the FCC's disposition of the petition.
"The term 'residential telephone line' is a fundamental element of the restrictions on artificial or prerecorded voice calls contained in the TCPA, a statute that the Commission implements and administers," the FCC wrote to the Second Circuit. "It is accordingly appropriate for this Court to stay its hand to give the Commission an opportunity to address the meaning and scope of the term (as Bank has now requested) in the first instance."
As the agency with primary responsibility for implementing and interpreting the TCPA, the FCC told the court it has never interpreted the term "residential telephone line" for purposes of the TCPA's restrictions on calls using an artificial or prerecorded voice.
The Commission has on two occasions "touched upon" the issue of who is a "residential telephone subscriber" under the FCC's do-not-call rules, but neither discussion clearly resolved the issue, the agency said. The first occurred in 2003 when the Commission established the national Do Not Call Registry of "residential telephone subscribers" who object to receiving telephone solicitations. The FCC allowed the registration of wireless telephone numbers, presuming that those who asked to join the list would be residential subscribers, without undertaking a factual analysis or requiring proof that they were in fact residential subscribers.
In 2005, the Commission acknowledged that there was nothing to preclude someone from adding a business or home-based business number to the DNC Registry, because it does not preclude calls to businesses. However, the FCC said at the time that it would "review such calls as they are brought to our attention to determine whether or not the call was made to a residential subscriber," leaving callers without any guidance or elaboration on the analysis the Commission might employ when making such a determination.
Given such uncertainty, the FCC suggested that the Second Circuit's consideration of the issue should be held in abeyance pending disposition of Bank's pending petition. "Congress authorized the Commission to interpret the undefined terms of the statute," the Commission wrote in its amicus brief, relying upon the primary jurisdiction doctrine. "There is no reason for this Court to address this open issue of statutory and regulatory interpretation before the Commission has a reasonable opportunity to resolve Bank's pending petition for declaratory ruling."
To read the petition in In the Matter of Todd C. Bank, click here.
To read the FCC's amicus brief in Bank v. Independence Energy Group, click here.
Why it matters: Although Bank filed his lawsuit before his petition for declaratory judgment, the FCC agreed that the litigation should be held in abeyance pending its decision on the issue. For advertisers and marketers, that means all eyes are now on the FCC as it considers how to interpret the term "residential line" under the TCPA. The request for public comment noted multiple possibilities, from Bank's suggested bright-line rule accepting even mixed-purpose telephone numbers on the Registry that are used for both residential and business lines, to a different form of bright-line test or to some other method, such as a multifactor analysis for determining whether a telephone line is a "residential line" for purposes of the artificial/prerecorded voice call prohibition. Public comments were accepted until May 2, and reply comments are due by May 17.
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TCPA Defendant's Offer of Judgment Doesn't Moot Lawsuit, Ninth Circuit Rules
Relying on recent U.S. Supreme Court precedent, the Ninth Circuit Court of Appeals affirmed a denial of the defendant's motion to dismiss a Telephone Consumer Protection Act case as moot after the plaintiff failed to accept an offer of settlement and judgment pursuant to Rule 68.
In 2013 a pair of plaintiffs filed suit against Allstate Insurance Company, alleging that the insurer made illegal unsolicited automatic telephone calls to their cell phones in violation of the TCPA. Richard Chen claimed he received a total of eight calls, while Florencio Pacleb said he got five. The plaintiffs sought to certify a nationwide class of call recipients who were entitled to statutory damages for willful and knowing violations and to injunctive relief.
Before any motion for class certification was filed, Allstate made an offer of judgment to Chen and Pacleb under Rule 68 of the Federal Rules of Civil Procedure in the amounts of $15,000 and $10,000, respectively, together with attorneys' fees and costs. The insurer also agreed to stop sending telephone calls and texts to them in the future.
Neither plaintiff accepted the offer within the 14-day window provided by Rule 68. Allstate then sent a letter to plaintiffs' counsel extending the offer and filed a motion to dismiss the lawsuit as moot. While the motion to dismiss was pending, Chen accepted the offer. Pacleb did not.
A federal district court denied the motion to dismiss, relying on a 2011 Ninth Circuit decision, Pitts v. Terrible Herbst, Inc., to hold that even if Pacleb's individual claims could be considered fully satisfied by the offer, the action as a whole continued to present a justiciable controversy affording Pacleb an opportunity to move for class certification. Allstate appealed. While the case was pending before the Ninth Circuit, a panel decided Gomez v. Campbell-Ewald, upholding the Pitts opinion. That case then went on to the U.S. Supreme Court, which ruled in January that an unaccepted offer to satisfy the named plaintiff's individual claim is insufficient "to render a case moot when the complaint seeks relief on behalf of the plaintiff and a class of persons similarly situated."
The Justices also reserved the question of how the Court would rule if a defendant deposited the full amount of the plaintiff's individual claim in an account payable to the plaintiff and the court then entered judgment for the plaintiff in that amount.
Seizing an opportunity, Allstate deposited $20,000 in a bank escrow account after the Supreme Court issued its opinion "pending entry of a final District Court order or judgment directing the escrow agent to pay the tendered funds to Pacleb, requiring Allstate to stop sending non-emergency telephone calls and short message service messages to Pacleb in the future and dismissing this action as moot."
Considering the question left unanswered by the Justices, a panel of the Ninth Circuit said Allstate's theory of mootness turned on three contentions: that the judgment it has consented to would afford Pacleb complete relief on his individual claims for damages and injunctive relief; that the district court should be required to enter judgment on these terms, and that, once the court does so, Pacleb's individual claims will become moot; and assuming Pacleb's individual claims become moot, the existence of his class allegations will be insufficient to preserve a live controversy.
The court agreed with Allstate's first contention but rejected the second and third.
Pacleb told the court that Allstate's offer did not provide him complete relief because his complaint seeks injunctive relief on a nationwide basis for all affected individuals, not simply himself. The court was not persuaded, however, as "Pacleb has given us no reason to believe the injunctive relief Allstate has consented to would be inadequate, or that he could obtain broader relief after a trial on the merits. Allstate, therefore, has consented to all the injunctive relief to which Pacleb individually is entitled."
Allstate's victory was short-lived, as the court turned to its argument that if it could fully satisfy Pacleb's individual claims, the action as a whole would be moot. But the panel held that Pitts remained good law, meaning that the plaintiff's class claims remained viable.
In Pitts, the Ninth Circuit observed that a named plaintiff's claim is "transitory in nature and may otherwise evade review" in light of the defense tactic of "picking off" lead plaintiffs to avoid a class action. "To the extent that defendants may avoid a class action by 'picking off' the named plaintiffs, the class claims are 'inherently transitory' and evade review, making an exception to the mootness rule appropriate," the court wrote in Pitts.
Although Allstate argued that Pitts was invalidated by another U.S. Supreme Court case, Genesis Healthcare Corp. v. Symczyk, the court distinguished that decision, as it involved a collective action under the Fair Labor Standards Act and not a class action under the Federal Rules of Civil Procedure. Therefore, the panel ruled, Pitts remains good law and even assuming Allstate could fully satisfy Pacleb's individual claims, Pacleb still would be able to seek class certification.
The Ninth Circuit then went one step further to rule that even if Pitts were not controlling, "we would reject Allstate's attempt to moot this action before Pacleb has had fair opportunity to seek certification."
As the court read Campbell-Ewald, a lawsuit or individual claim "becomes moot when a plaintiff actually receives all of the relief he or she could receive on the claim through further litigation," the three-judge panel explained. "Here, Pacleb has not yet received any relief on his individual claims for damages or injunctive relief. His claims are wholly unsatisfied, and it remains entirely possible for a court to grant him effectual relief."
There may have been occasions when the deposit of money in court could be treated as the equivalent of an actual payment and acceptance by a plaintiff, but that principle applied where the defendant "unconditionally relinquished" its entire interest in the deposited funds, the court said. "That has not occurred here," the panel wrote. "Allstate has neither deposited the $20,000 in the court nor unconditionally relinquished its interest in the $20,000 to Pacleb. On the contrary, Allstate retains its interest in the funds unless and until the district court dismisses this entire action as moot."
Finally, the court declined to direct the district court to enter judgment on Pacleb's individual claims, finding that Campbell-Ewald "clearly suggests" it would be inappropriate to enter judgment under the circumstances. "[W]hen a defendant consents to judgment affording complete relief on a named plaintiff's individual claims before certification, but fails to offer complete relief on the plaintiff's class claims, a court should not enter judgment on the individual claims, over the plaintiff's objection, before the plaintiff has had a fair opportunity to move for class certification," the panel held.
A named plaintiff "exhibits neither obstinacy nor madness by declining an offer of judgment on individual claims in order to pursue relief on behalf of members of a class," the court added, noting this approach was consistent with other Supreme Court decisions recognizing a named plaintiff's "personal stake" in obtaining class certification, leading treatises on federal procedures, and district court opinions issued since Campbell-Ewald (both from New York federal courts).
"In sum, a district court should decline to enter a judgment affording complete relief on a named plaintiff's individual claims, over the plaintiff's objection, before the plaintiff has had a fair opportunity to move for class certification," the Ninth Circuit concluded. "In this way, even if Pitts were not controlling, a live controversy would persist until the question of class certification could be addressed."
To read the opinion in Chen v. Allstate Insurance Company, click here.
Why it matters: The Ninth Circuit panel closed at least one of the doors left open after the U.S. Supreme Court's decision in Campbell-Ewald, holding that a named plaintiff must be provided with "a fair opportunity" to show that class certification is warranted in a TCPA class action, even where the defendant has made an offer of complete relief as to individual claims. Not only did circuit precedent require such an opportunity, the panel found, but so did Supreme Court decisions, treatises on federal civil procedure, and case law since Campbell-Ewald. At least in the Ninth Circuit, TCPA defendants face a significant obstacle to mooting a class action plaintiff's claims by making a full offer of judgment.
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Personal Liability Possible for TCPA Violations, New York Court Rules
Declining to grant the defendant's motion to dismiss, a federal court in New York held that an officer of a company accused of running afoul of the Telephone Consumer Protection Act could be personally liable for the violations.
Religious corporation Bais Yaakov of Spring Valley, New York, sued Graduation Source, LLC, and Jesse Alexander, the vice president of operations at the company. The plaintiff alleged that it received multiple unsolicited fax advertisements with a defective opt-out notice in violation of both the TCPA and New York state law.
The plaintiff further alleged that Alexander was personally responsible for designing and authorizing the distribution of the faxes at issue, and was "the guiding spirit and central figure behind these fax advertisements being sent in the manner in which they were sent."
Both defendants moved to dismiss the putative class action. The court granted the motion with respect to certain faxes, and said Alexander could be liable for the claims against him as an individual.
The defendants looked for support in the Federal Communications Commission order of October 2014 which recognized that some senders of fax ads with the recipient's prior express permission may have acted reasonably about whether the requirement for opt-out notices applied. The order also provided that senders could apply for a retroactive waiver of the FCC's opt-out requirement, which the defendants did.
The FCC granted the waiver, and despite mixed case law on the issue of the legality of the retroactive waivers, U.S. District Court Judge Nelson S. Roman held Graduation Source could not be liable for any solicited fax advertisements at issue.
"The Waiver does not, as Plaintiff contends, retroactively release Defendants from statutory liability," he wrote, dismissing concerns about separation of powers principles. "[O]n its face the TCPA only prohibits the sending of unsolicited faxes. It is the FCC's regulation interpreting the TCPA that extends the protections of the statute to solicited faxes. Thus, it is within the FCC's authority to determine when and how to apply this regulation, and to waive it for good cause."
However, Judge Roman was not persuaded by Alexander's argument that liability under both state law and the TCPA extends only to those who "initiate" or "send" unsolicited advertisements, respectively. Instead, the court adopted the plaintiff's position that liability in the TCPA context can be extended to individuals when they have direct, personal participation in or personally authorized the conduct found to have violated the statute.
The Second Circuit Court of Appeals has yet to weigh in on the issue, but the court cited support from decisions in Maryland, Ohio, and Texas applying the general tort rule that corporate officers or agents can be liable for torts performed in the name of an artificial body that they personally committed, inspired, or participated in.
"Defendants have not proffered any case law supporting their contention that the TCPA should be read so narrowly as to only include individuals who actually sent the unlawful advertisements—in other words the individual who used the fax machine to send the fax or who is identified on the fax as the sender," the court said. "Surely neither Congress nor the New York state legislature intended to restrict liability under the TCPA in such a way. Moreover, New York follows the same general tort rule regarding the personal liability of corporate officers that formed the basis of the district court decisions" relied upon by the court.
"Alexander may be held personally liable for violations of the TCPA if he 'had direct, personal participation in or personally authorized the conduct found to have violated the statute,' " Judge Roman wrote. "Plaintiff has alleged as much in the Complaint and its claim therefore survives Defendants' motion to dismiss."
To read the opinion in Bais Yaakov of Spring Valley v. Graduation Source, LLC, click here.
Why it matters: Corporate officers and agents in New York should certainly pay attention to the court's decision, which could leave them on the hook for personal liability in a TCPA dispute if a plaintiff can prove the individual had "direct, personal participation in or personally authorized the conduct found to have violated the statute."
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Debt Collection Company Pays $18M for TCPA Suit
In the latest multimillion-dollar Telephone Consumer Protection Act settlement, a debt collection company agreed to pay $18 million to end a consolidated class action in California federal court.
Portfolio Recovery Associates, LLC, was accused of making autodialed calls to consumer cell phones without consent over a seven-year period, from December 2006 to July 2013. Multiple lawsuits were filed against the company alleging violations of the TCPA, and the cases were consolidated in California federal court. In 2011 the court entered a preliminary injunction against Portfolio's continued use of certain dialing equipment to call cell phones and certified a class.
The parties then engaged in settlement negotiations and finally reached a deal earlier this year. Pursuant to the terms set forth in the plaintiffs' unopposed motion in support of preliminary approval of the agreement, the class will consist of approximately 7.4 million U.S. residents.
Class members will be entitled to both monetary and injunctive relief. The injunctive relief already in place "will be continued and expanded" to prohibit Portfolio "from using its Avaya Proactive Contact Dialer to place calls to any person's cellular telephone numbers without prior express consent."
As for monetary relief, Portfolio agreed to pay a total of $18 million. After the fund is used to pay attorneys' fees of up to $5.4 million, notice and administration costs not to exceed $3.325 million, and incentive awards for six named plaintiffs of $6,250 each, the remainder will be split on a pro rata basis among class members. Any remaining funds will be paid to the National Association of Consumer Advocates as cy pres relief.
"This is a substantial recovery for this case," the plaintiffs wrote in their motion. "[B]ased on historical claims rates for claims in TCPA cases, it is anticipated the claims rate will be between 2 percent and 5 percent. Even under conservative assumptions, the pro rata relief from the remaining $18 million common fund … would be over $60 at a 2 percent claims rate (150,000 claimants) and over $24 at a 5 percent claims rate (375,000 claimants). Hence, the range of expected recovery is well within the range received in other TCPA cases."
The plaintiffs moved for an order preliminarily approving the proposed settlement as "fair, adequate and reasonable," particularly given "the purposes of the TCPA and the risk, expense, and uncertainty of continued litigation."
To read the motion in support of preliminary approval of the settlement in In re Portfolio Recovery Associates, LLC, click here.
Why it matters: TCPA class actions continue to result in multimillion-dollar settlements, from Capital One's record-breaking $75 million deal to what was touted as the highest per-class-member agreement by Western Union (with $8.5 million promised to 823,472 individuals). Portfolio Recovery Associates' promise to pay $18 million keeps the trend alive.
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Noted and Quoted . . . Reilly Sums Up Eighth Circuit Reversal in Law360
The Eighth Circuit recently reversed a district court's rejection to certify a class that allegedly received a single-page fax from defendant Medtox Scientific about its lead-testing capabilities. The appellate court concluded that potential class members' identities could be derived from fax logs showing which phone numbers received fax transmissions. Christine Reilly, partner and co-chair of the firm's TCPA Compliance and Class Action Defense practice, distilled this ruling and stated that "by allowing plaintiffs to rely on a list of recipients rather than making them prove the identity of the individuals who actually received the unwanted communication, the appellate court essentially ignores a critical element of the TCPA claim, which is identifying who may have been injured from receipt of the fax." To read the full article, "8th Circ. Boosts TCPA Class Cert. Bids In Medtox Ruling," click here.
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