InfoBytes Blog

U.S. Supreme Court Holds TCPA Litigation Not Confined to State Courts

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.

TCPA

FTC Enhances Confidentiality of Investigations and Proposes Rule to Expedite Investigatory Processes

On January 13, by a vote of 5-0, the FTC adopted a new rule of practice (Rule 2.17) that streamlines internal procedures for staff seeking a court order to prevent investigation targets from learning about subpoenas and civil investigative demands issued by the FTC. The rule allows individual FTC Commissioners or the FTC’s general counsel to authorize the filing of a court action to delay notification to individuals required under the Right to Financial Privacy Act and the Electronic Communications Privacy Act when the FTC is seeking records from financial institutions or service providers.

Also on January 13, the FTC proposed additional changes to Parts 2 and 4 of its Rules of Practice to expedite Commission investigations and ensure that the FTC’s investigatory processes keep pace with electronic discovery advances. Among the proposed changes is a requirement for an accelerated meet-and-confer schedule to resolve electronic discovery disputes, as well as a proposal to relieve parties of their obligations to preserve documents after a year passes with no written communication from the FTC. The public can comment on the proposed rule changes through March 23, 2012.

FTC

Massachusetts District Court Says Zip Codes Constitute Personal Identification Information

On January 6, the U.S. District Court for the District of Massachusetts found that a retailer’s collection of ZIP codes during a credit card transaction can constitute a violation of Mass. Gen. Laws ch. 93, §105(a) (the Act), but held that a plaintiff must allege actual harm. Tyler v. Michaels Stores, Inc., No. 11-10920, 2012 WL 32208 (D. Mass. Jan. 6, 2012). The complaint, filed on behalf of a putative class, alleged that a retailer’s request for customer ZIP codes when processing credit card transactions violates the Act because ZIP codes constitute protected personal identification information (PII). Noting that the plaintiff alleged only that she had received unwanted mail, not that the information was sold or otherwise exposed her to an increased risk of fraud, the court agreed with the retailer and held that the plaintiff failed to allege actual injury. However, the court found that ZIP codes are PII under the Act, and that plaintiff had alleged a per se statutory violation. The court warned that "[s]ince retailers so routinely request a customer's ZIP code at the point-of-sale in a credit card transaction, they ought note here that this Court holds [the retailer] potentially to have violated [the Act] if such request was made during a transaction in which the credit card issuer did not require such disclosure.” The court’s decision also distinguished the Act as "much narrower in scope” than California’s Song-Beverly Act, which is intended not only to prevent fraud like the Act, but also to "prevent[] retailers from directly or indirectly obtaining personal identification information for marketing purposes," which was the subject of the California Supreme Court’s holding in Pineda v. Williams Sonoma, Inc., 246 P.3d 612 (Cal. Sup. Ct. 2011). On January 13, plaintiff moved the court to certify the question of law at issue in this case to the Massachusetts Supreme Court.

Privacy/Cyber Risk & Data Security

Ninth Circuit Holds That California Law Cannot be Applied to a Nationwide Class

On January 12, the U.S. Court of Appeals for the Ninth Circuit reversed the certification of a forty-four state class of consumers, finding that California’s consumer protection laws could not be applied to a nationwide class, and that even a California-only class failed the rigorous analysis required for certification recently affirmed in the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). Mazza v. American Honda Motor Co., Inc., No. 09-55376, 2012 WL 89176 (9th Cir. January 12, 2012).

In Mazza, plaintiffs sued a California vehicle manufacturer for violations of California’s unfair competition and false advertising laws as well as unjust enrichment, alleging that the manufacturer misrepresented and concealed material information in its marketing of vehicles equipped with a collision safety system. The court found that under California’s choice of law rules, each state had an interest in the application of its own laws to the claims of those putative class members who purchased or leased vehicles in those states. Further, material differences among the forty-four states’ laws required that each state’s law must be applied to the transactions that occurred in-state. The court noted that each state has an interest in determining the level of liability faced by companies operating in-state, such that “[m]aximizing consumer and business welfare, and achieving the correct balance for society, does not inexorably favor greater consumer protection; instead, setting a baseline of corporate liability for consumer harm requires balancing the competing interests” in each state. Accordingly, the class could not be maintained under Federal Rule of Civil Procedure 23(b)(3) because the material variations in the laws of the multiple states “overwhelm common issues and preclude predominance for a single nationwide class.” The court also held that even a California-only class failed the predominance requirement of Rule 23(b)(3) because class members could not be presumed to have relied on the manufacturer’s “very limited” advertisements of the collision safety system. According to the court, unlike the sort of “extensive and long-term” fraudulent advertising campaign that could justify a presumption of reliance by members of the class, the manufacturer’s campaign was neither temporally expansive nor affirmatively dishonest. Thus, the individual factual issues regarding whether each class member had actually seen the advertising prior to purchasing or leasing the vehicle precluded class certification.

Class Action