TCPA Connect

Christine Reilly Joins Manatt as Co-Chair of the Firm’s TCPA Practice Group

Manatt is pleased to welcome Christine Reilly as a litigation partner in the firm’s Los Angeles office and co-chair of the TCPA Compliance and Class Action Defense practice group. “We are excited to have Christine join us and look forward to our clients benefiting from her extensive experience in defending and advising on TCPA matters,” said Marc Roth, who co-chairs the group with Reilly. In addition to her client work, Reilly founded and manages the TCPA Defense Forum on LinkedIn, which provides a platform for members to share and comment on current TCPA developments. For more information about this group, click here.

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TCPA Suit on Hold Pending FCC Petitions

A federal court judge has stayed a class action pending a decision by the Federal Communications Commission on the issue of whether the agency overstepped its bounds by issuing regulations stating that the Telephone Consumer Protection Act requires solicited fax advertisements to include opt-out notices.

Physicians Healthsource sued Endo Pharmaceuticals in Pennsylvania federal court, alleging in its putative class action that it received two fax ads that lacked opt-out notices. Although the TCPA is limited to a requirement that unsolicited fax ads must contain opt-out notices, the plaintiff relied upon an FCC regulation requiring opt-out language for solicited faxes as well.

But in its motion to stay the proceedings, Endo disputed the validity of the regulation. The FCC overstepped its authority, the defendant told the court, and promulgated a rule that exceeded the bounds of the TCPA. A number of administrative petitions filed with the FCC make similar arguments, Endo added.

Considering the motion, U.S. District Court Judge Cynthia M. Rufe acknowledged a split among courts facing a similar problem. District courts in California, Connecticut, Florida, and New Hampshire have all decided to put cases making identical allegations on hold pending FCC action, she noted, while a judge in Michigan declined to do so.

Although the court said the FCC has no schedule to reach a final decision on the issue and any stay may be open-ended, she sided with the defendant and halted the proceedings.

“[T]he Court believes that the issues before the FCC are potentially dispositive of identical claims before this court,” the judge wrote. “For example, the FCC may determine that the statute does not create a private right of action when a solicited fax advertisement lacks an opt-out notice. Judicial efficiency will be better served by imposing a stay of litigation while the FCC considers these related issues, which have already been presented to it, which are within the FCC’s domain of specialized knowledge, and which may significantly limit the scope of this action.”

Judge Rufe also considered the “risk of inconsistent rulings” if she ruled on the issue prior to the FCC. “Balancing the equities, the Court finds potential prejudice to the Defendants if they must defend this action without guidance from the FCC on issues such as statutory authority and standing to pursue a private right of action.”

The court placed the case in administrative suspense pending adjudication of related actions by the FCC, requesting joint status reports from the parties every 90 days.

To read the order in Physicians Healthsource, Inc. v. Endo Pharmaceuticals, click here.

Why it matters: The stay of proceedings will buy the defendant some time as the FCC considers multiple petitions arguing that the agency overstepped its authority when it issued regulations stating that the TCPA requires solicited fax advertisements to include opt-out notices. While the agency has requested comment on the issue, the FCC has set no timeline for making a decision.

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Discovery Allowed in TCPA Class Action

A defendant in a Telephone Consumer Protection Act lawsuit was unable to strike class allegations in the case, although the Illinois federal district court judge did toss one of the named plaintiffs.

In a consolidated class action complaint filed in February 2014, five plaintiffs alleged that State Farm Mutual Automobile Insurance Company was vicariously liable for telemarketing calls made on its behalf by third party Variable Marketing in violation of the TCPA.

After losing its motion to dismiss the suit, State Farm sought to dismiss the individual claims of two of the plaintiffs and strike the class allegations, arguing that the plaintiffs had set forth a fail-safe class definition.

The complaint proposed the following class definition: “All persons within the United States who received a non-emergency telephone call from Variable, placed while Variable was acting on behalf of State Farm, to a cellular telephone through the use of an automatic telephone dialing system or an artificial or prerecorded voice.”

Because the members of the class necessarily depend on a future decision on the merits – specifically, which calls Variable made “on behalf of” State Farm – the class definition was impermissible, the defendant told the court.

Alternatively, the plaintiffs contended that the motion was premature and that they should be allowed to conduct discovery before the court ruled on the issue of class certification. U.S. District Court Judge Amy St. Eve sided with the plaintiffs. “It may be that Variable, State Farm, or a third party maintained records that identify which Variable calls were directed to State Farm agents,” she wrote. “Simply put, Plaintiffs need additional discovery to determine the extent to which they can link calls made by Variable to State Farm. At this point, it is not clear that Plaintiffs allege a ‘fail-safe’ class.”

Other arguments against certification from State Farm – that the class is not ascertainable, that the plaintiffs’ claims require individualized determinations, and that the factual and legal differences in the theories of vicarious liability overwhelmed commonalities – were also brushed aside by the court.

“While State Farm may ultimately prevail on one or more of these arguments at the class certification stage, Plaintiffs are first entitled to conduct further class discovery to determine the extent to which they can refute these arguments by linking the Variable calls to State Farm,” the judge said.

However, the court did agree that one of the named plaintiffs should be tossed from the suit. State Farm challenged two of the plaintiffs, Matt Clark and Josh Friedman. While Clark made a sufficient allegation in which he stated the phone number that placed a call to him and linked it to a telemarketer placing calls on behalf of State Farm, Friedman did not.

Friedman stated only that he “received a telephone call to his cell phone from [a telephone number] via an automatic telephone dialing system and using an artificial or prerecorded voice.” He did not allege that he received the call from State Farm or from anyone calling on State Farm’s behalf; nor did he allege to whom the phone number belongs. Friedman “cannot state a cause of action against [State Farm] by pleading only that he received a phone call from an unknown number,” Judge St. Eve said, dismissing his claims without prejudice.

To read the order in Smith v. State Farm Mutual Automobile Insurance Co., click here.

Why it matters: While some courts have agreed with TCPA defendants that plaintiffs have constructed an impermissible fail-safe class (like an Ohio federal court last year in a suit against CVS Pharmacy), the Illinois judge was not persuaded by State Farm’s position. The plaintiff’s vicarious liability allegations and the possibility that a third party might have records of the calls made on State Farm’s behalf were sufficient to keep the class claims alive, at least for now.

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TCPA Violation Can’t Form the Basis for FDCPA Suit

A debt collector that technically violated the Telephone Consumer Protection Act in order to comply with the Fair Debt Collection Practices Act cannot be liable under the FDCPA, a Pennsylvania federal court judge has ruled.

Oxford Law called Ninouska Gomez and left a message on her phone using a prerecorded voice. The message stated in part:

“[P]lease hang up or disconnect. If you are Gomez, Vinouish please continue to listen to this message. There will now be a three-second pause in this message. By continuing to listen to this message you acknowledge that you are Gomez, Vinouish. You should listen to this message in private as it contains personal and private information. There will now be a short pause in this message to allow you to listen to this message in private.

“This is Casey Fox from Oxford Law, LLC. This communication is from a debt collector. This is an attempt to collect a debt and any information obtained will be used for that purpose. Please contact me at 215-526-2600. Thank you.”

Gomez filed a single-count complaint contending that the call violated the FDCPA. Specifically, she pointed to 15 U.S.C. Section 1692e(5), which states that a debt collector runs afoul of the statute when it “threat[ens] to take any action that cannot legally be taken or that is not intended to be taken.”

Two distinct types of conduct are prohibited by Section 1692e(5), Gomez told the court: threats to take action that cannot be legally taken and illegal acts. She alleged that Oxford Law’s call violated the TCPA, which in turn made it an illegal act under the FDCPA.

The TCPA requires that calls using a prerecorded voice must identify the business, individual or other entity that is responsible for the incoming call “at the beginning of the message.” Because the defendant failed to identify himself until the seventh sentence of the message, Gomez said the call was an illegal act under Section 1692e(5) that occurred during the collection of a debt.

U.S. District Court Judge James M. Munley disagreed for two reasons.

“First, section 1692e(5)’s plain meaning applies only to threats to take any action that cannot legally be taken or that is not intended to be taken. Here, the message is devoid of any threat,” the court said. “Defendant is not threatening to institute a debt collection lawsuit. Defendant is not threatening to garnish plaintiff’s wages. Rather, defendant is asking the plaintiff to call it back.”

Secondly, even if the court were willing to construe Section 1692e(5) to include both threats and illegal acts, “defendant’s technical violation of the TCPA – the illegal act – is not the type of illegal act the FDCPA prohibits,” Judge Munley wrote, and “no court has extended Section 1692e(5)’s ‘illegal act’ language to a technical violation of another law.”

The court cited numerous federal court decisions that held that the filing of a lawsuit, moving for default judgment absent the legal authority to do so, or filing and serving a writ of garnishment, are deemed the illegal acts within the meaning of 1692e(5).

The court denied the plaintiff’s motion for summary judgment and granted Oxford Law’s motion for judgment on the pleadings.

To read the order in Gomez v. Oxford Law, click here.

Why it matters: The court refused to find that a TCPA violation could trigger liability under the FDCPA. Judge Munley emphasized that the defendant’s message “is at most a technical violation” of the TCPA because the introductory comments at the beginning of the message were apparently an attempt to ensure that no one but the debtor would listen to the message as required by the FDCPA. “Thus, the defendant ‘violated’ the TCPA to comply with the FDCPA,” the court wrote in a footnote.

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Defendant’s Settlement Offer Moots TCPA Claims

After a Telephone Consumer Protection Act defendant made a settlement offer of more than the plaintiff could recover in the litigation, a Minnesota federal court judge granted its motion for summary judgment.

Sandusky Wellness Center sued Medtox Scientific for sending a junk fax advertising lead testing services in violation of the TCPA. In response, Medtox made a two-part settlement offer: a check for $3,500 and a promise to not “send another facsimile to plaintiff in the future unless plaintiff specifically requests that Medtox do so.”

The next day, Medtox filed a motion to dismiss the suit.

But the court denied the motion, pointing out that Sandusky asserted class claims and the settlement offer did not provide classwide relief. However, the court then denied Sandusky’s motion for class certification, limiting the case to the single fax from Medtox.

On cross-motions for summary judgment, the second time proved to be the charm for the defendant, as U.S. District Court Judge David S. Doty dismissed the case.

“The offer provides complete relief to Sandusky,” the judge wrote, noting that federal courts “do not sit simply to bestow vindication in a vacuum. . . . As a result, dismissal of Sandusky’s claim is warranted as moot.”

Judge Doty disagreed with the plaintiff’s argument that Medtox’s offer was insufficient.

Not only did the offer provide complete monetary relief, the “$3,500 offer exceeds Sandusky’s possible statutory recovery of $500 and the taxable costs it has incurred,” the court said, as the plaintiff had conceded that it was not entitled to recover attorneys’ fees or trebled damages.

Further, “the offer provides the equitable relief sought by Sandusky, namely the promise to refrain from sending such faxes to Sandusky in the future,” the judge wrote. The plaintiff’s position that the injunctive relief was inadequate because it was not in the form of court-ordered injunctive relief was unfounded, he said.

“If Medtox sends an unsolicited fax advertisement to Sandusky in the future, Sandusky may sue under the TCPA and may well be entitled to treble damages under such circumstances,” Judge Doty said. “The court nevertheless will include Medtox’s promise to refrain from future solicitations in this order to ensure that Sandusky has meaningful legal recourse in the context of this case.”

As no case or controversy remained, the court granted summary judgment for the defendant.

To read the order in Sandusky Wellness Center v. Medtox Scientific, click here.

Why it matters: While the defendant’s first attempt at getting the case dismissed based on the settlement offer failed, the deal proved fruitful when coupled with the court’s denial of class certification. Other TCPA defendants considering similar action should note the court’s approval that the deal covered more than the possible financial recovery and costs for the plaintiff and included injunctive relief.

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Noted and Quoted . . . Roth Pens Article for Mobile Marketer on TCPA Compliance Risks and Recent Developments

Marc Roth, a Manatt partner and Co-chair of the TCPA Compliance and Class Action Defense group, was recently invited to author a column for Mobile Marketer in which he summarized the Telephone Consumer Protection Act rules, reviewed major TCPA developments in the past year and provided his outlook into what the future holds.

To read the full article, “TCPA compliance remains a headache for marketers,” click here.

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