TCPA Connect

Yet Another Blow to Spokeo Strategy in TCPA Cases

By A. Paul Heeringa, Counsel, Financial Services Group | Diana L. Eisner, Associate, Litigation

Consistent with the growing trend among lower federal courts, the U.S. Court of Appeals, Third Circuit recently reversed a district court order in Susinno v. Work Out World, which had dismissed a putative Telephone Consumer Protection Act (TCPA) class for lack of standing where the plaintiff had received a single prerecorded call from the defendant offering a VIP gym membership but otherwise suffered no damages.

Since Spokeo v. Robins, 136 S.Ct. 1540 (2016) was decided in May 2016, a first line of defense for litigants facing TCPA class claims was to argue that the named plaintiff lacked standing under Article III of the U.S. Constitution. This argument was grounded in Spokeo’s holding that standing requires a “concrete injury” even where a plaintiff is claiming merely a statutory violation as opposed to actual damages—which is often true in putative TCPA class actions.

In Susinno, the named plaintiff alleged that she suffered harm from Work Out World’s single, unsolicited call to her cell phone—which she did not answer, was left on her voicemail, and resulted in no fees or other expense to her—because it reduced her available cellular minutes, wasted her time retrieving the voicemail, depleted her cellular phone battery and was a “nuisance.” In essence, the Third Circuit agreed with the plaintiff, ruling that the single call was an invasion of the plaintiff’s privacy and was precisely the type of harm against which the TCPA was designed to protect despite the marked lack of monetary harm.

In particular, the panel wrote that “[w]here a plaintiff’s intangible injury has been made legally cognizable through the democratic process, and the injury closely relates to a cause of action traditionally recognized in English and American courts, standing to sue exists.” In some respects, this language seems at odds with Spokeo, which expressly ruled that “Congress’ role in identifying and elevating intangible harms does not mean that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right. Article III standing requires a concrete injury even in the context of a statutory violation.” It is unclear from the Third Circuit’s decision whether it is in fact finding that a statutory violation is sufficient to confer standing or if something more is required. And it will be interesting to see how this language is interpreted in the district courts.

Why it matters: The Third Circuit is the most recent among various federal courts to find Article III standing under Spokeo even in the face of a one-time, seemingly intangible injury. While the Third Circuit is typically plaintiff-friendly in the consumer protection arena, this decision demonstrates that the Spokeo card will be a difficult one to play in TCPA cases. As Spokeo has not been the silver bullet some in the defense bar (optimistically) hoped it would be, knowledge of the TCPA and creativity in defending these cases remain critical.

The complete Susinno opinion is publicly available here.

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FCC Hits ‘Neighborhood Spoofer’ With $120M Fine

By Christine M. Reilly, Chair, TCPA Compliance and Class Action Defense | Diana L. Eisner, Associate, Litigation

The Federal Communications Commission (FCC) has proposed a $120 million fine against an individual who used “neighbor spoofing” to make more than 96 million robocalls over a three-month period.

Adrian Abramovich ran afoul of the Truth in Caller ID Act, the federal wire fraud statute, and the TCPA, the FCC said in its Notice of Apparent Liability for Forfeiture (NAL), when the companies under his control imitated the area code of call recipients to trick them into answering the phone, thinking it was a local call.

Those who answered heard automated messages from callers that falsely claimed to be affiliated with well-known travel and hospitality companies (such as Marriott and TripAdvisor), offering vacations and cruises to destinations such as Mexico and the Caribbean. But Abramovich had no relationship with the companies referenced in the messages, the FCC said, and when callers were routed to live operators, they were sold vacation packages and time shares.

After being tipped off by TripAdvisor about the calls, the FCC launched an investigation, subpoenaing call records for a three-month period from Oct. 1, 2016, to Dec. 31, 2016. During that time, Abramovich’s business made 96,758,223 calls, averaging over a million calls per day. The Bureau sampled 1,000 calls from the records for each day of the time period (for a total sample of 80,000 calls) and found that every reviewed call was spoofed in order to match the area code and central office code of the called number.

Based on this evidence—what the agency said was one of the largest spoofed robocall campaigns it has ever investigated—the FCC issued its first forfeiture under the Truth in Caller ID Act based on spoofing.

To calculate an appropriate dollar amount for the proposed forfeiture, the FCC weighed a case of first impression with the egregiousness of the harm to serve as both a punishment and a deterrent to future wrongdoing, proposing a base forfeiture in the amount of $1,000 per unlawful spoofed call for each of the 80,000 calls the FCC specifically examined.

Given the sheer volume of the calls made and the direct harms to consumers, the FCC said the case merited “a significant upward adjustment,” adding another $40 million, for a total forfeiture of $120 million. Abramovich is directly liable for the amount, the FCC said, as he had dissolved his company before the violations cited by the agency occurred and was no longer entitled to the protections of the corporate form.

To read the NAL, click here.

Why it matters: “The FCC is an active cop on the beat for consumers, and a cop that means business when it comes to their top concern: the scourge of robocalls,” FCC Chairman Ajit Pai said in a statement about the action. “We aim to put unlawful robocallers out of business and to deter anyone else from hatching a business plan that plunders American consumers’ pocketbooks.” Now that it has issued its first forfeiture under the Truth in Caller ID Act, the FCC noted that future spoofing cases could involve higher penalties “in light of their particular facts and circumstances.”

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D.C. Circuit Denies Stay, Solicited Fax Rule Remains Invalidated

By Christine M. Reilly, Chair, TCPA Compliance and Class Action Defense | Diana L. Eisner, Associate, Litigation

Continuing the good news for TCPA defendants on the fax front, the U.S. Court of Appeals, D.C. Circuit refused to postpone its invalidation of the FCC’s Solicited Fax Rule pending an appeal to the Supreme Court.

The federal appellate panel struck down the rule in March. Created in a 2006 FCC order, the rule required that even fax advertisements sent with a recipient’s prior express invitation or permission contain an opt-out notice with specified information.

Over the years, dozens of companies were granted waivers from compliance with the rule. One TCPA defendant—a pharmaceutical company facing the potential of $150 million in liability for allegedly failing to include the required opt-out notice in a series of faxes sent to consenting recipients—challenged the rule in a petition to the FCC.

When the agency upheld the rule, the pharmaceutical company sought review from the D.C. Circuit, joined by several other parties on both sides of the issue. Concluding that “Congress drew a line in the text of the statute between unsolicited fax advertisements and solicited fax advertisements,” the panel tossed the rule.

The plaintiffs appealed the decision to the en banc D.C. Circuit, which issued a one-sentence order denying the petition without further comment.

Appealing again, the plaintiffs filed a writ of certiorari with the Supreme Court. Waiting to hear whether the justices agree to take the case, the plaintiffs also requested that the D.C. Circuit postpone the impact of its ruling pending a grant or denial of cert.

But again wasting little ink, the court issued a one-sentence denial in a per curiam order, leaving in place its March opinion striking down the rule.

To read the order in Bais Yaakov of Spring Valley v. FCC, click here.

Why it matters: The D.C. Circuit’s denial of a stay means its earlier opinion finding the rule invalid remains in effect, a victory for TCPA defendants. The only obstacle in the way of companies leaving out the previously required information is the small chance that the Supreme Court grants certiorari in the case.

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Order Forms Not Ads, Eleventh Circuit Affirms Dismissal

By Christine M. Reilly, Chair, TCPA Compliance and Class Action Defense | Diana L. Eisner, Associate, Litigation

Order forms faxed to a doctor by a company that supplies medical products purchased by consumers did not constitute advertisements, the U.S. Court of Appeals, Eleventh Circuit has ruled, affirming dismissal of a TCPA suit.

Arriva Medical supplies medical products by mail to individuals with diabetes and other diseases. The company markets its products to consumers, who purchase the products directly from Arriva. If the consumer wants insurance reimbursement for the purchase, his or her doctor must confirm that the product is appropriate to treat the medical condition.

To facilitate this process, Arriva sends a fax to its customers’ physicians, explaining that a patient has ordered one of its products and providing an order form that the doctor must complete and return to Arriva before it ships the product to the patient.

After receiving four different faxes from Arriva in July 2016, The Florence Endocrine Clinic filed a TCPA suit claiming the order forms were “unsolicited advertisements” sent in violation of the statute.

Arriva moved to dismiss the suit, arguing that the faxes were not unsolicited advertisements because they were not directed to physicians for the purpose of marketing its products and did not attempt to sell anything to the clinic.

A district court agreed, granting the motion to dismiss. The clinic appealed, but the Eleventh Circuit affirmed.

“Advertising” is “[t]he action of drawing the public’s attention to something to promote its sale,” the court explained, and to fall within the TCPA, “the fax must draw attention to the ‘commercial availability or quality’ of Arriva products to promote their sale.”

But the faxes at issue did not meet this standard, the panel said.

“The faxes do not promote the sale of Arriva goods because … the fax only requests information to complete an order already made,” the court wrote. “Arriva sent the faxes to the physician of the patient who requested the product. Each fax included an instruction page that explained which patient requested the Arriva product and requested that the physician complete an attached order form.”

The clinic neither alleged that Arriva intended that the faxes induce the physicians at the clinic to prescribe Arriva products to other patients nor alleged that the faxes request that the doctors purchase the products, the panel added.

“To the contrary, the complaint alleges that ‘Arriva engages in aggressive direct marketing of its products to patients,’ not the doctors,” the court said. “The faxes do not ‘promote the sale’ of any Arriva product, but instead request information from physicians in connection with orders already placed by patients of those physicians.”

The panel distinguished case law involving faxes that encouraged recipients to prescribe a drug or attend a program where certain products and services would be promoted, writing that the clinic cited no decision “that determines that a fax requesting that a physician complete an order form at the behest of a specific patient qualifies as an ‘advertisement’ under the Act.”

“The faxes sent by Arriva to the clinic are not ‘advertisements’ within the meaning of the Act,” the Eleventh Circuit concluded. “Each fax relates to a specific order already placed by a patient of the clinic and requests only that the doctor of the patient fill out an order form to facilitate a purchase made by that patient. The complaint does not allege that the purpose of the faxes was to induce the clinic to purchase Arriva products, nor does it allege that the purpose of the faxes was to induce the physicians to prescribe those products to patients who had not already requested those products from Arriva. We agree with the district court that the complaint filed by the clinic fails to state a claim on which relief may be granted.”

To read the opinion in The Florence Endocrine Clinic v. Arriva Medical, LLC, click here.

Why it matters: The panel had little difficulty in finding that the order forms at issue did not constitute an “advertisement” under the TCPA, particularly since they were sent only after a patient had already purchased a product and did not attempt to encourage the physician recipients to buy or prescribe any products.

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Seventh Circuit Applies Campbell-Ewald to Rule 67

By Christine M. Reilly, Chair, TCPA Compliance and Class Action Defense | Diana L. Eisner, Associate, Litigation

Interpreting the Supreme Court’s opinion in Campbell-Ewald v. Gomez, the U.S. Court of Appeals, Seventh Circuit declared that tendering funds into a court-monitored interest-bearing account is not enough to moot a claim in a TCPA class action.

In Fulton Dental, LLC’s December 2015 complaint against Bisco Inc., the company cited two violations of the TCPA: lack of consent and omission of an opt-out notice in a fax advertising dental products. Fulton sought statutory damages as well as injunctive relief along with certification of a class of those similarly situated.

Before Fulton could file a motion for class certification, Bisco made the plaintiff an offer of judgment pursuant to Federal Rule of Civil Procedure 68 of $3,005 plus accrued costs. Bisco also agreed to have the requested injunction entered against it.

But two days later, the Supreme Court decided Campbell-Ewald, holding that “an unaccepted settlement offer or offer of judgment does not moot a plaintiff’s case.” Fulton then rejected Bisco’s offer.

Given some of the language in the Campbell-Ewald majority, concurring and dissenting opinions, Bisco tried another tack: moving for leave to deposit $3,600 with the district court under Rule 67. The amount represented the maximum possible damages Fulton could receive, plus $595 for fees and costs, Bisco told the court, contending that coupled with the injunctive relief, the deposit mooted Fulton’s claim.

The plaintiff opposed the motion, arguing that it was an improper use of Rule 67. But the district court sided with the defendant, granting the motion and treating the deposit of funds as the equivalent of giving the money directly to Fulton. The plaintiff appealed, and the Seventh Circuit reversed.

Taking a closer look at Campbell-Ewald, the panel pointed out that the justices drew no distinction between unaccepted Rule 68 settlement offers and other unaccepted settlement or contract offers. Therefore, the court said Bisco couldn’t get around the Court’s prohibition on pick-off efforts under Rule 68 by using Rule 67.

“[W]e see no principled distinction between attempting to force a settlement on an unwilling party through Rule 68, as in Campbell-Ewald, and attempting to force a settlement on an unwilling party through Rule 67,” the Seventh Circuit wrote. “In either case, all that exists is an unaccepted contract offer, and as the Supreme Court recognized, an unaccepted offer is not binding on the offeree.”

For Fulton, the suit is “about more than the statutory damages to which it believes it is entitled; it is also about the additional reward that it hopes to earn by serving as the lead plaintiff for a class action,” the court added. “Nothing forces it to accept Bisco’s valuation of the latter part of the case.”

The panel also took issue with the characterization of the court’s registry as “an account payable to the plaintiff,” finding it “nothing like a bank account in the plaintiff’s name—that is, an account in which the plaintiff has a right at any time to withdraw funds.” Instead, funds can be withdrawn only under the control and permission of the court.

Having determined that the action was not moot, the court recognized that the door remained open to a motion for class certification as well.

“We conclude that an unaccepted offer to settle a case, accompanied by a payment intended to provide full compensation into the registry of the court under Rule 67, is no different in principle from an offer of settlement made under Rule 68,” the Seventh Circuit wrote. “The law governing unaccepted contractual offers, as well as the law of tenders, supports this result. Moreover, the court’s registry is not the kind of ‘individual account’ controlled by the plaintiff that was contemplated in the question reserved by Campbell-Ewald. Finally, we cannot say as a matter of law that the unaccepted offer was sufficient to compensate plaintiff Fulton for its loss of the opportunity to represent the putative class.”

To read the decision in Fulton Dental, LLC v. Bisco, Inc., click here.

Why it matters: In the wake of Campbell-Ewald, defendants have tried to figure out a way to fit into the gap left by the opinion and pay a plaintiff what it has offered instead of just making the offer. However, these attempts have been largely rejected by courts in considering the reach of Campbell-Ewald. Bisco’s attempt at using Rule 67 fared no better with the Seventh Circuit. The panel also reiterated the importance of allowing a class representative a chance to pursue certification and intimated that the payment offered by the defendant was insufficient to compensate the plaintiff for any potential service award.

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