TCPA Connect

Join Christine Reilly at TCPA Compliance Summit, Feb. 21

On February 21, Christine Reilly, co-chair of Manatt's TCPA compliance and class action defense practice, will join industry experts to discuss the challenges faced by companies to maintain compliance with regulatory mandates such as the Telephone Consumer Protection Act and Fair Credit Reporting Act at Danal's TCPA Compliance and Identity Summit. This complimentary program will highlight tools and resources available in the market to solve regulatory compliance and identity challenges.

To submit your own compliance questions to be discussed at the Summit, click here.

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Manatt Adds Leading Payments, Regulatory and Consumer Financial Services Lawyer

Anita L. Boomstein has joined Manatt’s New York office as chair of the firm’s global payments practice. She has extensive experience advising brick-and-mortar retailers, e-commerce companies and issuers on the regulatory issues surrounding credit, debit, prepaid, loyalty and gift card programs, including strategic alliances involving virtual accounts and electronic money transfers. Boomstein joins the firm from Hughes Hubbard and Reed LLP, where she was a partner in the banking and financial services practice. For more information, click here.

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Case Not Moot Even After Rule 67 Funds Deposited

Is a Telephone Consumer Protection Act class action moot where a defendant actually deposits sufficient funds with the court to satisfy a plaintiff’s claim pursuant to Federal Rule of Civil Procedure 67?

No, a federal court judge in Illinois ruled, finding that a controversy remained between the parties.

Wendall H. Stone Company filed a putative class action suit alleging that Metal Partners Rebar ran afoul of the TCPA by sending at least one unsolicited fax advertisement. Before Stone filed for class certification, Metal Partners moved to deposit $30,500 with the court pursuant to Rule 67, an amount it claimed would fully satisfy the plaintiff’s individual claims.

Relying on the U.S. Supreme Court decision in Campbell-Ewald v. Gomez, the defendant requested that the court enter judgment in favor of Stone, arguing that the deposit of funds would render moot both the individual and class claims.

But U.S. District Court Judge Matthew F. Kennelly denied the motion, ruling that even if the court permitted the deposit, a case or controversy would continue to exist.

The court first determined that Metal Partners’ requested deposit was permissible, noting that district courts have discretion as to whether to employ Rule 67. The deposit would not overburden the court nor would it run counter to the purposes of the Rule, the court said, and rejected Stone’s argument that allowing the deposit would lead to similar deposits in other class actions.

However, despite permitting the deposit, the court said it did not render moot Stone’s individual claims or those of the putative class.

“The mere filing of a motion to deposit funds does not render a plaintiff’s claims moot, for the same reason that an unaccepted offer under Rule 68 does not do so,” the court wrote. “If submitting an offer immediately rendered a case moot, the court would have no authority to enter a decree, enforce the order, or ensure that the plaintiff receives the relief provided for in the offer. Therefore a plaintiff’s claim cannot be rendered moot—based on the premise that he has received full relief—before the Court actually exercises its authority to grant the relief.”

Judge Kennelly declined to exercise his authority to grant such relief, ruling that “permitting Metal Partners to make Stone’s individual claim moot in this manner would undermine the purposes of the class action device,” something the Seventh Circuit Court of Appeals has frowned upon. “By separating Stone’s interests from those of other potential class members, Metal Partners attempts to defeat a potential class action by satisfying only Stone’s individual claim. In this way, Metal Partners might perpetually evade a class action by making a similar motion for every representative plaintiff that comes forward.”

Because the court found that Stone’s individual claim would not be rendered moot, the class claims likewise remained active.

After reaching its conclusion, the court then added an alternative basis for its holding. “[E]ven if it were to rule that a defendant’s deposit of funds could render a plaintiff’s claims moot, Metal Partners’ proposed deposit would not do so here,” Judge Kennelly wrote. The defendant said it conducted an investigation and found nine potential faxes sent to the fax number Stone provided, which provided the basis for an estimate of Stone’s damages (9 x $1,500 = $13,500, jumping to $30,500 for a “significant cushion”).

But the parties disputed the number of unauthorized faxes, the court said, with Stone claiming that the number of faxes sent by Metal Partners is “unknown at this time.” “Because the Court cannot determine definitely whether this offer would provide complete relief on Stone’s individual claim, Metal Partners’ deposit of $30,500 cannot render moot either Stone’s individual claim or his class claims,” the court declared.

To read the opinion and order in Wendell H. Stone Company, Inc. v. Metal Partners Rebar LLC, click here.

Why it matters: TCPA defendants had looked with hope to the suggestion in Campbell-Ewald v. Gomez that a deposit of funds with the court pursuant to Rule 67 could moot a plaintiff’s claims. This Illinois federal court disagreed, thus foreclosing this strategy in that district. Whether this decision deters defendants in other districts around the country remains to be seen.

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Latest TCPA Settlement Costs $14.5M

In the most recent multimillion-dollar settlement of a Telephone Consumer Protection Act class action, American Eagle Outfitters agreed to pay $14.5 million in a dispute over allegedly unsolicited text messages.

Four putative class actions against the national clothing retailer were consolidated in New York federal court. They alleged that American Eagle Outfitters relied on telemarketers that used an automatic telephone dialing system to send advertising texts on its behalf to consumers who had not provided prior express written consent.

After more than two years of litigation—including discovery and motion practice—the parties mediated an agreement. American Eagle agreed to pay a total of $14.5 million into a non-reversionary settlement fund that provided class counsel payments of up to $4,832,850 in fees and $111,943.80 in costs; administrative costs estimated between $408,000 and $647,000 and incentive awards to the four named plaintiffs of $10,000 each.

The remainder—approximately $8,768,206—will be distributed among the 618,289 potential class members who submit a valid and timely claim form. Based on a conservative claims rate range of 5 to 10 percent, the plaintiffs estimated that each class member will receive between $142 and $285. The parties designated the National Consumer Law Center as the recipient of any amounts remaining in the settlement fund after disbursements.

“The proposed settlement is more than fair, reasonable, and adequate, and exceeds many approved class settlements under the TCPA on a per class member recovery,” according to the plaintiffs’ unopposed motion for preliminary approval of the deal, noting other agreements with awards such as $40 cash or an $80 voucher or a payment of $46.98.

To read the unopposed motion for preliminary approval of class settlement in Melito v. American Eagle Outfitters, Inc., click here.

Why it matters: American Eagle Outfitter’s $14.5 million deal is the most recent multimillion-dollar TCPA settlement, and as class actions continue to be filed under the statute, likely won’t be the last. Retailers in particular appear to be a favorite target by the plaintiff’s bar.

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Single Informational Call Doesn’t Violate TCPA

A single informational call could not form the basis of a Telephone Consumer Protection Act class action, a California federal court judge ruled in granting summary judgment in favor of the defendant.

Blue Shield of California Life & Health Insurance Company was hit with the lawsuit in 2015 by California resident Shannon Smith. Smith alleged that she received a pre-recorded phone call from the health plan to notify her that she had been mailed a packet with information about renewing her policy.

Insurers are required by federal law to provide written notice to consumers of changes to their policies (such as an increase in premiums or modifications to coverage for particular services) prior to the annual open enrollment period, Blue Shield explained. But because numerous information packets were returned as undeliverable in prior years, the insurer decided to call each of its existing members to alert them to the fact that their packets had been mailed.

The final script of the pre-recorded call read: “Hello. This is an important message from Blue Shield of California. It’s time to renew your 2016 health plan options and see what’s new. Earlier this month, we mailed you information about your 2016 plan and benefit changes. It compares your current health plan to other options from Blue Shield. You can also find more online at If you have not received your information packet in the mail, or if you have any questions, please call the number on the back of your member ID card. Thank you. Goodbye.”

Smith claimed that the message was a telemarketing call for which she had not provided consent to receive because the call was part of the insurer’s retention strategy, was written by the defendant’s marketing team, and included a link to Blue Shield’s renewal page with the phrase “We want to keep you covered.”

But U.S. District Court Judge Cormac J. Carney—after determining that the plaintiff stated sufficient allegations of concrete harm to establish standing in line with Spokeo, Inc. v. Robins—rejected Smith’s argument that the call constituted an advertisement.

“Simply stated, the text of Blue Shield’s telephone call is informational,” the court said. “It notified recipients that they should have received information about changes to their insurance plan, encouraged them to seek out information about their plan by examining the information packet and visiting Blue Shield’s website, and directed them to call the member service number (as opposed to the sales department) to resolve any questions or issues.”

The call had an “informative, non-telemarketing nature,” the judge noted, similar to calls found by other courts not to be advertisements (such as a text message received after opting into a rewards program and a welcome message after submitting an online registration form) and contrasting “starkly” with messages that courts have deemed to be telemarketing or advertising.

The suggestion that recipients visit Blue Shield’s website did not sway the court, as the insurer’s goal was to direct customers to the renewal tool, which was also purely informational. “The mere fact that parts of Blue Shield’s website [contain] the capability of allowing consumers to engage in commerce does not transform any message including its homepage into telemarketing or advertising.”

And Blue Shield’s “overarching incentive to retain customers and receive premium payments” was “simply too attenuated to give rise to a clear, unequivocal implication of advertising.”

Deeming the call informative rather than advertising or telemarketing was also consistent with the Health Insurance Portability and Accountability Act (HIPAA), the court said, which allows insurers to contact their members about matters relating to renewal or replacement of their insurance coverage. “The call in this case is, therefore, not marketing under HIPAA as it is entirely about changes to and replacement of Plaintiff’s health insurance,” Judge Carney wrote.

“Were this Court to hold otherwise, it would transform practically all communication from any entity that is financially motivated and exchanges goods or services for money into telemarketing or advertising, which would contravene the delineated definitions of telemarketing or advertising in [TCPA regulations],” the court concluded. “Evaluating Blue Shield’s call with a measure of common sense, the Court must conclude that the call is not telemarketing or advertisement within the meaning of [TCPA regulations].”

To read the order in Smith v. Blue Shield of California Life & Health Insurance Company, click here.

Why it matters: The court adopted a common sense approach to what constitutes advertising or telemarketing pursuant to the TCPA’s regulations, particularly in light of the defendant’s potential liability under the statute. “It makes no sense to the Court that a single call tracking Blue Shield’s mandatory communications regarding insurance enrollment and renewal would expose Blue Shield to millions of dollars of liability under the TCPA,” Judge Carney wrote. This decision adds yet another arrow to a healthcare company’s quiver when defending against a TCPA claim based on prerecorded informational calls to members.

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Jury Hits Dish With $20M TCPA Verdict

A federal jury has awarded $20.5 million against Dish Network for calls made by a third party in a Telephone Consumer Protection Act class action.

Although he was included on the federal Do Not Call Registry, Thomas Krakauer claimed that he received multiple phone calls from authorized Dish dealer Satellite Systems Network. Krakauer argued that Dish—which has a history of TCPA violations—was responsible for the illegal telemarketing of its agents.

“Dish took the view that compliance was the dealers’ responsibility, and fell back on self-serving contractual provisions to attempt to shield itself from liability for the illegal telemarketing conducted on its behalf,” Krakauer alleged in his North Carolina federal court complaint.

Relying on the U.S. Supreme Court’s decision in Spokeo, Inc. v. Robins, Dish sought to dismiss the suit, asserting that Krakauer failed to allege concrete harm as a result of the calls. The court disagreed, denied the motion, and set a trial for January 2017.

During the five-day trial, Dish told jurors it should not be liable for the calls made by Satellite Systems. But the jury answered in the affirmative to the question “Was SSN acting as Dish’s agent when it made the telephone calls at issue from May 11, 2010 through August 1, 2011?”

Out of a range between $0 and $500, the ten-person jury awarded class members $400 for each of the roughly 51,000 phone calls, for a total of $20.4 million.

In a statement, Dish indicated it may appeal. “Dish thanks the jurors for their service, but respectfully disagrees with today’s verdict and is evaluating its legal options,” a spokesperson said. “Regardless, Dish has long taken its compliance with telemarketing laws seriously, has and will continue to maintain rigorous telemarketing compliance policies and procedures, and has topped multiple independent customer service surveys along the way.”

To read the verdict sheet in Krakauer v. Dish Network, click here.

Why it matters: Many TCPA defendants hoped that the Spokeo decision would have a positive impact in extinguishing DNC violation claims, offering an avenue to limit or dispose of cases based on the threshold requirement of concrete harm to bring suit in federal court. Those hopes did not play out in the case against Dish Network and the company is on the hook for more than $20 million. Just as important is the long-standing lesson for companies that they may not avoid liability for the bad acts of others acting on their behalf.

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Ninth Circuit Rules on Scope, Revocation of TCPA Consent

A Telephone Consumer Protection Act defendant scored a victory when the U.S. Court of Appeals for the Ninth Circuit ruled that by providing his phone number to his former gym, the plaintiff granted consent to be contacted in the future, even by a different named company.

Bradley Van Patten joined a Gold’s Gym in Green Bay, Wisconsin in March 2009. As part of his application, he provided contact information including his cell phone number. Just a few days later, however, he called and canceled his membership. In 2012, Vertical Fitness (which owned the Gold’s Gym Van Patten had joined) launched an advertising campaign to recruit prior members.

Vertical provided the phone numbers of former or inactive gym members to a marketing company to send text messages as part of the campaign. Van Patten received this message in March 2012: “Golds [sic] Gym is now Xperience Fitness. Come back for $9.99/mo, no commitment. Enter for a chance to win a Nissan Xterra! Visit”

Van Patten sued. He alleged that he never provided his consent to receive text messages from the gym and that, even if he had, he revoked that consent when he canceled his membership. A U.S. District Court judge disagreed, granting summary judgment in favor of Vertical, and the Ninth Circuit affirmed.

After establishing that Van Patten had standing under Spokeo, Inc. v. Robins, the panel considered the context in which the plaintiff provided his cell phone number.

Although the Federal Communications Commission has stated that “persons who knowingly release their phone numbers have in effect given their invitation or permission to be called at the number which they have given, absent instructions to the contrary,” this does not mean that a consumer has expressly consented to contact for any purpose whatsoever, the court said. “In our view, an effective consent is one that relates to the same subject matter as is covered by the challenged calls or text messages.”

The scope of consent depends on “the transactional context in which it is given,” the court added, and the call or text message “must be based on the circumstance in which the consumer gave his or her number.”

In the plaintiff’s case, he gave prior express consent to receive certain types of text messages from the gym, the court said. “Van Patten gave his consent to being contacted about some things, such as follow-up questions about his gym membership application, but not to all communications,” the court wrote. “The scope of his consent included the text messages’ invitation to ‘come back’ and reactivate his gym membership. The text messages at issue here were part of a campaign to get former and inactive gym members to return, and thus related to the reason Van Patten gave his number in the first place, to apply for a gym membership.”

Did Van Patten revoke his consent when he canceled his gym membership? No, the Ninth Circuit determined. While consumers may revoke their prior express consent, the plaintiff failed to do so effectively.

“Revocation of consent must be clearly made and express a desire not to be called or texted,” the panel wrote. “That was not done here. No evidence in the record suggests that Van Patten told Defendants to cease contacting him on his cell phone. Some ways Van Patten could have communicated his revocation include, but are not limited to, plainly telling Defendants not to contact him on his cell phone when he called to cancel his gym membership or messaging ‘STOP’ after receiving the first message.”

As Van Patten did not revoke his consent, the panel affirmed summary judgment in favor of the gym.

To read the opinion in Van Patten v. Vertical Fitness Group, LLC, click here.

Why it matters: The Ninth Circuit’s decision in Van Patten provides several important lessons for advertisers. First, the panel made quick work of the defendant’s standing argument under Spokeo, having little trouble finding that “the telemarketing messages at issue here, absent consent, present the precise harm and infringe the same privacy interests Congress sought to protect in enacting the TCPA.” But, that plaintiff-friendly holding was tempered somewhat by the court’s recognition that when a consumer provides a phone number, he or she agrees to receive messages within a certain scope of issues. Finally, the panel established that revocation of consent “must be clearly made and express a desire not to be called or texted”—a standard the plaintiff failed to meet by merely cancelling his membership.

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In Case You Missed It: SMS Compliance Webinar Available On-Demand

Last week, Marc Roth, co-chair of Manatt’s TCPA compliance and class action defense practice, presented a webinar in conjunction with MessageMedia, a leading texting platform provider, that addressed TCPA compliance issues surrounding consumer communication via SMS messaging. Among the many issues he covered during the “Navigating SMS Compliance” webinar, Marc focused on the different consent requirements for informational and telemarketing text messages. To access a free download of this webinar, click here.

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