Supreme Court: Settlement Offers Do Not Moot Class Actions, But…

The United States Supreme Court on Wednesday resolved the long-standing circuit split on whether an offer to satisfy the named plaintiff’s individual claims is sufficient to render a case moot when the complaint seeks relief on behalf of the plaintiff and a class of similarly situated individuals. In a 6-3 decision authored by Justice Ginsburg, the Supreme Court held that an unaccepted settlement or Rule 68 offer cannot moot a class action. However, the Court refused to address and explicitly left open the question of whether its ruling would be different 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. By leaving this question open, defendants in a position to unilaterally provide complete relief may still be able to “pick off” putative class representatives and avoid class action suits. Read more…

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Debt Collection and Beyond in 2015

Aaron-Mahler Walt-Zalenski John Redding captionIn 2015, the CFPB further expanded its reach into debt collection through a number of enforcement actions. The CFPB also continues to conduct research on a potential rulemaking regarding debt collection activities, which may address information accuracy concerns involving debt sales and other collection activity, as well as many other issues regarding how creditors collect their own debts and oversee collectors working on their behalf. In addition to CFPB activity, this year’s Madden v. Midland Funding, LLC decision has important implications beyond the debt collection industry. Finally, developments regarding the Telephone Consumer Protection Act (TCPA) and collections will likely be of interest to regulatory agencies in the new year.

Debt Sale Consent Orders and Regulatory Guidance

Among the CFPB enforcement actions relevant to debt collection in 2015 were two consent orders with large debt buyers. These orders resolved allegations that the debt buyers, among other things, engaged in robo-signing, sued (or threatened to sue) on stale debt, made inaccurate statements to consumers, and engaged in other allegedly illegal collection practices. In particular, the CFPB criticized the practice of purchasing debts without obtaining supporting documentation or information, or taking sufficient steps to verify the accuracy of the amounts claimed due before commencing collection activities. Under the consent orders, one company agreed to provide up to $42 million in consumer refunds, pay a $10 million civil money penalty, and cease collecting on a portfolio of consumer debt with a face value of over $125 million. The second company agreed to provide $19 million in restitution, pay an $8 million civil money penalty, and cease collecting on a consumer debt portfolio with a face value of more than $3 million. In addition, both companies agreed to refrain from reselling consumer debt more generally. Read more…

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Third Circuit Vacates New Jersey District Court’s Dismissal of TCPA-related Case

On October 14, the Court of Appeals for the Third Circuit ruled the recipient – intended or not – of a prerecorded call has standing under the TCPA, so long as the recipient has sufficient ties to the number called. Leyse v. Bank of America NA, No. 14-4073 (3rd. Cir. Oct. 14, 2015). In 2011, a roommate of the intended recipient sued a financial institution after answering a prerecorded telemarketing call seeking to advertise credit cards on behalf of the financial institution. In 2014, the District Court of New Jersey dismissed the case on the grounds that the plaintiff was not the intended recipient of the call and, therefore, lacked standing. The Third Circuit vacated that ruling, holding that the TCPA’s “zone of interests encompasses more than just the intended recipients of the prerecorded telemarketing calls” and that “[l]imiting standing to the intended recipient would disserve the very purposes Congress articulated in the text of the Act.”

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FCC Cites Two Companies over Unauthorized Telemarketing Allegations

On September 11, the FCC issued citations against a Pennsylvania-based financial institution and a transportation network company (TNC), alleging that both companies engaged in unlawful business practices by infringing consumers’ rights to be free of unauthorized telemarketing robocalls to residential and wireless phones. The financial institution’s citation alleges that the bank required customers to agree to receive autodialed telemarketing texts in order to use its online banking and Apple Pay services. The TNC’s citation alleges that, although it allows consumers who sign up for ride-sharing service to opt out of receiving autodialed or prerecorded telemarketing calls and texts, the TNC does not allow users to access the service if they exercise these opt out rights. Both citations allege that these practices violate the FCC’s rules implementing the Telephone Consumer Protection Act (TCPA), and direct the companies to take immediate steps to come into compliance with the FCC’s rules, orders, and the TCPA prohibition against unlawful marketing and advertising calls. The FCC also warned that future violations may result in monetary forfeitures.

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District Court Finds that Texts Sent Via Mobile App Not Subject to TCPA Due to Users’ “Affirmative Choices” to Send Messages

On August 24, a California district court ruled in favor of a rewards-based app company, rejecting plaintiffs’ arguments that the company violated the Telephone Consumer Protection Act (TCPA). Huricks v. Shopkick, Inc., No. c-14-2464-mmc (N.D. Cal. Aug. 24, 2015). In Huricks, plaintiffs brought a putative class action, arguing that the company’s mobile app sent spam text messages with links to the company’s website to mobile phones without consumers’ consent in violation of the TCPA and a derivative claim under the California Business and Professions Code. In rejecting plaintiffs’ claims and granting summary judgment on all counts, the court relied on a recent FCC Order where the FCC ruled, among other matters, that a company was not the maker or initiator of invitational text messages subject to the TCPA’s requirements when users of the app make a series of “affirmative choices” in order for the text messages to be sent. The court ruled that, even though the company controlled the text message’s content, the company’s evidence established that a user of its app “must [have] proceed[ed] through a multi-step invitation flow within the app” to cause text messages to be sent to the user’s contacts. The court noted that users of the app had to (i) tap a button to invite friends, (ii) choose which contacts to invite, and (iii) choose to send the text message by selecting another button.  The court concluded the company was not the initiator of these texts under the TCPA and granted the company’s motion for summary judgment.

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POSTED IN: Courts, Digital Commerce

FCC Adopts Chairman Wheeler’s Proposal to Strengthen Consumer Protection Under the TCPA

On June 18, the FCC held an Open Commission Meeting, during which the Commission adopted Chairman Wheeler’s proposal to strengthen consumer protection under the TCPA. The set of declaratory rulings included in the proposal affirms consumers’ rights to revoke their consent to receive robocalls or robotexts at any reasonable time an in any reasonable way, and gives carriers the ability to provide consumers with “Do Not Disturb” technology. The Commission’s June 18 Action by Declaratory Ruling and Order was described as an effort to close “loopholes and [strengthens] consumer protections already on the books.”

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FCC Chairman Circulates Proposal to Strengthen Consumer Protection Under the TCPA; Open Meeting Scheduled For June 18

On May 27, the FCC released a fact sheet outlining Chairman Wheeler’s proposal for a series of rulings under the Telephone Consumer Protection Act (TCPA) that he asserts will better protect American consumers from unsolicited robocalls, spam text messages, and telemarketing calls. If adopted, the proposal would, among other things: (i) give consumers the right to revoke their consent to receive robocalls and robotexts at any reasonable time and in any reasonable way; (ii) authorize carriers to offer robocall-blocking or “Do Not Disturb” technologies to consumers; and (iii) require robocallers to stop calling a number when it has been reassigned to a new subscriber. Responding to multiple petitions that “sought clarity on how the Commission enforces” the TCPA, the proposal aims to “close loopholes and strengthen consumer protections already on the books.” The Chairman’s proposal is scheduled to be voted on at the Open Commission Meeting on June 18.

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Supreme Court Grants Cert. to Decide if Offer of Complete Relief Moots Case

On May 18, the Supreme Court granted certiorari to resolve a circuit split as to whether an offer of complete relief to a plaintiff seeking to represent a putative class moots the case. Campbell-Ewald Co. v. Gomez, 2015 WL 246885 (U.S. May 18, 2015). According to the cert. petition, the plaintiff received an unsolicited text message in 2006 from the petitioner, a firm hired by the U.S. Navy to assist with its recruitment efforts. The plaintiff claimed that the text message violated the Telephone Consumer Protection Act, and sought to represent a class of all non-consenting recipients of the recruitment text. Before the plaintiff had moved for class certification, the petitioner tendered an offer of judgment pursuant to Fed. R. Civ. P. 68 and a separate informal settlement offer, both of which would have fully satisfied the plaintiff’s individual claim by offering more than the maximum statutory damages plus reasonable costs and injunctive relief. The plaintiff rejected the offers and moved for class certification. The district court rejected the petitioner’s claim that the claim was moot, but eventually granted the petitioner summary judgment on the merits on the ground that the petitioner was entitled to “derivative sovereign immunity.” The Ninth Circuit reversed, holding that the case was not moot and that the district court had improperly applied the derivative sovereign immunity doctrine. The Supreme Court granted cert. to consider both questions. As to the mootness issue, the Court will also consider whether the resolution depends on whether or not the class has been certified at the time of the offer.

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District Court Awards Florida Couple Over $1 Million In Robocalls Suit

Recently, the U.S. District Court for the District of Florida denied a major bank’s motions to vacate and modify a judgment that awarded a Florida couple a total of $1,051,000 – approximately $1,500 per unauthorized call. Coniglio v. Bank of America, N.A., No. 8:14-CV-01628-EAK-MAP (M.D. Fla. December 4, 2014). In a complaint filed in July, the couple claimed the bank violated the Telephone Consumer Protection Act after they received over 700 calls in four years, including calls from an automated telephone dialing system, without their consent. The calls began as a result of the couple falling behind on their mortgage payments in 2009. In October, the Court agreed with the couple’s claims and ordered the bank to pay the awarded amount.

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ABA Petitions FCC To Allow Security And Fraud Alerts To Customers Without Consent

On October 14, the ABA submitted a petition to the FCC requesting that it exercise its statutory authority to allow financial institutions to send consumers certain security and fraud alerts without the consumers’ prior consent. Specifically, the consumers would receive alerts regarding: (i) transactions suggesting a risk of identity theft or fraud; (ii) potential security breaches involving personal information; (iii) preventative steps consumers can take to decrease their chances of falling victim to security breaches, in addition to steps they can take to remedy harm already caused by a breach; and (iv) actions required to receive a receipt for money transfers. The petition notes that the most effective way to ensure that consumers receive these important messages is through automated texts and calls to mobile devices and accordingly requests that the FCC allow for an exemption to the Telephone Consumer Protection Act to ensure that customers receive security and fraud notifications in a timely manner.

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Bank Agrees To Resolve TCPA Class Action Litigation

On July 14, a national bank, numerous related companies, and several of their third-party collection vendors agreed to pay $75 million to resolve class claims that the bank and other parties violated the TCPA by using an automatic telephone dialing system and/or an artificial prerecorded voice to call mobile telephones without prior express consent. The bank maintains that its customer agreement provided it with prior express consent to make automated calls to customers on their mobile telephones, and that the TCPA permits prior express consent to be obtained after the transaction that resulted in the debt owed. Although they agreed to resolve the matter through settlement to avoid further costs of litigation, the bank and other defendants deny all material allegations.

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Connecticut Broadens Telemarketing Prohibitions

Recently, Connecticut Governor Dannel Malloy signed SB 209, which makes a number of changes to the restrictions on unsolicited telemarketing contacts with consumers. Under current law, telemarketers are prohibited from making an unsolicited sales call to consumers on the state “Do Not Call” registry unless they receive a consumer’s prior written or verbal consent. The bill removes the verbal consent option, requiring telemarketers to obtain prior express written consent before making such calls. In addition to unsolicited calls, the bill also prohibits without prior express written consent unsolicited text or media messages, as well as unsolicited, automatically dialed, recorded telephonic sales calls—i.e. robocalls. Under the bill, a text or media message is a message that contains written, audio, video, or photographic content and is sent electronically to a mobile telephone or electronic device telephone number, but does not include electronic mail. The bill also increases the maximum fine for each violation from $11,000 to $20,000.

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Eleventh Circuit Holds TCPA Consent To Receive Autodialed Calls Must Come From Current Cell Phone Subscriber

On March 28, the U.S. Court of Appeals for the Eleventh Circuit held that, under the Telephone Consumer Protection Act (TCPA), consent to receive autodialed calls on a cell phone number must be provided by the number’s current subscriber and not the intended recipient of the call. Osorio v. State Farm Bank, F.S.B., No. 13-10951, 2014 WL 1258023 (11th Cir. Mar. 28, 2014). The case arose when a credit card applicant (and eventual cardholder) provided her housemate’s cell phone number on the issuing bank’s credit card application. After the cardholder became delinquent on her credit card payments, and a collection agency hired by the bank made over 300 autodialed calls to the housemate’s cell phone, the housemate filed suit against the bank under the TCPA, arguing that he did not consent to receive autodialed calls from the bank. The Eleventh Circuit held that the cardholder had no authority to consent to the collection calls because only the subscriber—the housemate—could have given such consent, either directly or through an authorized agent. The court further held that the cardholder and the housemate, in the absence of any contractual restriction to the contrary, were free to orally revoke any consent previously given to call the number in connection with the credit card debt. Finally, the court rejected the bank’s argument that the TCPA prohibits autodialed calls only when the called party is charged for each specific call. The court reversed a district court ruling in favor of the bank and remanded for further proceedings.

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Second Circuit Reinstates Federal TCPA Class Action

On December 3, the U.S. Court of Appeals for the Second Circuit held that federal rules govern when determining whether a federal TCPA suit may proceed as a class action and reinstated a case dismissed based on New York state class action rules. Bank v. Independence Energy Group LLC, No. 13-1746, 2013 WL 6231563 (2nd Cir. Dec. 3, 2013). A federal district court dismissed, sua sponte, a TCPA class action complaint based on the application of New York state civil procedure, which prohibits class-action suits for statutory damages. On appeal, the Second Circuit agreed with the named plaintiff that, based on the U.S. Supreme Court’s holding last year in Mims v. Arrow Financial Services, LLC, 132 S. Ct. 140 (2012), Federal Rule of Civil Procedure 23 applies when deciding whether a federal TCPA suit can proceed as a class action. In Mims, the Court had held that TCPA Section 227(b)(3) permits private parties to bring an action in an appropriate state court, but does not require that private actions seeking redress under the TCPA be heard only by state courts. Here, the Second Circuit reasoned that Mims “suggests that in enacting the TCPA, Congress merely enabled states to decide whether and how to spend their resources on TCPA enforcement,” and that “Congress had a strong federal interest in uniform standards for TCPA claims in federal court.” Based on Mims, the Second Circuit rejected its prior interpretation of section 227(b)(3) as having “substantive content” and providing a delegation of authority to state courts to set the terms of TCPA claims. Accordingly, the court held that Federal Rule of Civil Procedure 23, not state law, governs when a federal TCPA suit may proceed as a class action.

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Seventh Circuit Holds TCPA Does Not Preempt State Law Banning Robocalls

On November 21, the U.S. Court of Appeals for the Seventh Circuit held that the federal Telephone Consumer Protection Act (TCPA) does not preempt an Indiana statute that bans most robocalls without exempting calls that are not made for a commercial purpose. Patriotic Veterans, Inc. v. State of Indiana, No. 11-3265, 2013 WL 6114836 (7th Cir. Nov. 21, 2013). A not-for-profit Illinois corporation seeking to use automatically dialed interstate phone calls to deliver political messages to Indiana residents sought a declaration that the Indiana Automated Dialing Machine Statute (IADMS) violates the First Amendment, at least as it applies to political messages, and also is preempted by the TCPA, which expressly exempts non-commercial calls such as political calls from the TCPA’s regulation of autodialers. Overturning the district court’s decision, the Seventh Circuit found that the Indiana statute is not expressly preempted by the TCPA because the plain language of the TCPA’s savings clause states that the federal law does not preempt any state law that prohibits the use of automatic telephone dialing systems and, even if the IADMS is considered a regulation of, rather than a prohibition on, the use of autodialers, the savings clause does not at all address state laws that impose interstate regulations on their use. The court further found that the IADMS is not impliedly preempted by the TCPA because it is possible to comply with the state statute without violating the TCPA, the state statute furthers the TCPA’s purpose of protecting the privacy interests of residential telephone subscribers, and Congress did not intend to create field preemption when it enacted the TCPA. The court, however, remanded the case to the district court to consider whether the statute violates the First Amendment.

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