On January 29, a credit card holder filed a putative class action against a card issuer that funds consumer retail credit accounts for customers of a major retail chain, alleging that the issuer violated the Telephone Consumer Protection Act in attempting to collect on the card holder’s credit card debt. Complaint, French v. Target Nat’l Bank, No. 13-233 (S.D. Cal. filed Jan. 29, 2013). The named plaintiff claims that after she fell behind on her payments, the issuer began making numerous calls daily to her personal cell phone, a number she claims not to have provided to the issuer. The issuer allegedly used an “automatic telephone dialing system” to make the calls, which the card holder claims continued even after she notified the issuer that it was not authorized to contact her on her cellular phone, and asked that the calls cease. The card holder alleges that in doing so, the issuer violated the TCPA, which requires express written consent from a consumer prior to receiving calls from an automated dialing system or an artificial or prerecorded voice. On behalf of the proposed class, the card holder is seeking $500 in statutory damages for each and every alleged negligent violation, and treble damages for each alleged knowing or willful violation. The suit is the latest in a growing number of cases to be filed in recent years, particularly in California, and highlights a significant litigation risk for card issuers and debt collectors.
Federal District Court Holds Phone Number Provided in Online Account Information Is Consent to Receive Text Messages
On May 30, the U.S. District Court for the Northern District of California held that a user of an online service consented to receiving text messages from that service by including his mobile number in his online account information. Roberts v. PayPal, Inc., No. 12-622, 2013 WL 2384242 (N.D. Cal. May 30, 2013). In this case, a PayPal user filed a putative class action claiming that the company sent unsolicited advertisements via text messages to users’ mobile phones in violation of the Telephone Consumer Protection Act, which generally prohibits unsolicited calls and messages using automatic dialing or prerecorded voices absent express written consent. The court granted summary judgment to PayPal, holding that, by providing his mobile phone number to PayPal when he added the number to his online account, the user provided express consent for PayPal to send text messages. The court did not resolve PayPal’s alternative argument that the user consented to receiving messages by accepting the terms of PayPal’s user agreement, which included an express consent to receive autodialed calls. That provision was not included in the agreement at the time the user created his PayPal account and accepted the user agreement, but was added several years later without notice to the user. The court expressed skepticism concerning the binding nature of an agreement amendment that is merely posted to a website without other notice to the customer, even if the customer has previously agreed to the terms and that procedure.
On October 12, the U.S. Court of Appeals for the Ninth Circuit upheld provisional class certification for a plaintiff debtor, who claimed that a debt collector had violated the Telephone Consumer Protection Act (TCPA) by using an automatic dialer to place calls to plaintiff and other debtors’ cellular telephone numbers obtained via skip-tracing, and where the debtors also had not expressly consented to be called. Meyer v. Portfolio Recovery Assocs. LLC, No. 11-56600, 2012 WL 4840814 (9th Cir. Oct. 12, 2012). The debt collector argued, in part, that typicality or commonality issues should preclude class certification because some debtors might have agreed to be contacted at their telephone numbers, which were obtained after the debtors incurred the debt at issue. Citing a recent FCC declaratory ruling, the court noted that prior express consent is deemed granted only if the debtor provides a cellular telephone number at the time of the transaction that resulted in the debt at issue. The court thus rejected the debt collector’s argument, and held that debtors who provide their cellular telephone numbers after the time of the original transaction are not deemed to have consented to be contacted under the TCPA. In addition, the court upheld the district court’s grant of a preliminary injunction to the plaintiff, finding that he had established a likelihood of success on his TCPA claim and had demonstrated irreparable harm based on the debt collector’s continuing violations of that statute.
On September 17, the U.S. District Court for the District of Washington approved a settlement entered into between a student lender and a class of borrowers who alleged that the lender violated the Telephone Consumer Protection Act (TCPA) by employing an automated dialing system to place collection calls to borrowers’ cell phones. The lender and its affiliated companies agreed to pay $24 million to resolve the case and avoid the costs of further proceedings, but the lender continues to vigorously deny the allegations. According to counsel for the class, the settlement, which the parties have been negotiating since 2010, is the largest settlement to date under the TCPA.
On January 18, the U.S. Supreme Court unanimously held that the Telephone Consumer Protection Act (TCPA) does not require that private actions seeking redress under the TCPA be heard only by state courts. Mims v. Arrow Financial Services, LLC, No. 10-1195, 2012 WL 125429 (Jan. 18, 2012). The decision reversed an Eleventh Circuit decision upholding a district court’s finding that Congress had placed exclusive jurisdiction over private TCPA actions in state courts. In so reversing, the Supreme Court contravened prior decisions from the Second, Third, Fourth, Fifth and Ninth circuits. Unlike those decisions, the Supreme Court found no reason to convert the TCPA’s permissive grant of jurisdiction to state courts into an exclusive grant barring the federal-question jurisdiction of U.S. district courts. According to the Supreme Court, in the TCPA Congress enacted “detailed, uniform, federal substantive prescriptions” related to telemarketing and “provided for a regulatory regime administered by a federal agency.” Congress could have, but did not, seek only to fill gaps in states’ enforcement capability.