InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Supreme Court to review TCPA debt collection exemption
On January 10, the U.S. Supreme Court announced it had granted a petition for a writ of certiorari filed by the U.S. government in Barr v. American Association of Political Consultants Inc.—a Telephone Consumer Protection Act (TCPA) case concerning an exemption that allows debt collectors to use an autodialer to contact individuals on their cell phones without obtaining prior consent to do so when collecting debts guaranteed by the federal government. As previously covered by InfoBytes, the 4th Circuit agreed with the plaintiffs (a group of several political consultants) that the government-debt exemption contravenes the First Amendment’s Free Speech Clause, and found that the challenged exemption was a content-based restriction on free speech that did not hold up to strict scrutiny review. “Under the debt-collection exemption, the relationship between the federal government and the debtor is only relevant to the subject matter of the call. In other words, the debt-collection exemption applies to a phone call made to the debtor because the call is about the debt, not because of any relationship between the federal government and the debtor,” the appellate court opined. However, the panel sided with the FCC to sever the debt collection exemption from the automated call ban instead of rendering the entire ban unconstitutional, as requested by the plaintiffs. “First and foremost, the explicit directives of the Supreme Court and Congress strongly support a severance of the debt-collection exemption from the automated call ban,” the panel stated. “Furthermore, the ban can operate effectively in the absence of the debt-collection exemption, which is clearly an outlier among the statutory exemptions.” The petitioners—Attorney General William Barr and the FCC—now ask the Court to review whether the government-debt exception to the TCPA’s automated-call restriction is a violation of the First Amendment. Oral arguments are set for April 22.
District Court approves $12.5 million settlement in TCPA class action
On October 28, the U.S. District Court for the Northern District of Illinois granted final approval of a $12.5 million TCPA class action settlement between a group of consumers and three cruise lines and their marketing group (collectively, “defendants”). According to the opinion, a consumer filed the action against the defendants alleging they violated the TCPA’s prohibition of the use of an autodialer without prior consent. While the motion for class certification was pending, the parties reached an agreement-in-principle for a class-wide settlement. The settlement requires the defendants to, among other things, set up a common fund of $12.5 million to permit each claimant to “recover for up to three calls per telephone number, with a maximum value for each call set at $300.” The court noted that after deducting attorneys’ fees, other costs, and an incentive award for the principal plaintiff, the nearly 275,000 class members will be eligible to receive an average of about $22 per claim. The court noted that while $22 is “significantly below the $500 recovery available under the statute for each call… a settlement does not need to provide the class with the maximum possible damages in order to be reasonable.” The court went on to state that the settlement “still serves the purpose of punishing [the cruise lines] for their role in the controversy,” and the total settlement fund is a “deterrent to potential future defendants who might think twice about violating the TCPA in an effort to boost business.”
District Court denies TCPA class certification involving collection calls placed to wrong number
On September 27, the U.S. District Court for the Middle District of Florida denied class certification in an action alleging violations of the TCPA, the Florida Consumer Collection Practices Act, and the FDCPA brought against two companies. The action alleged that defendants used an automated telephone dialing system (autodialer) to call the plaintiff’s cell phone using a “prerecorded voice” while trying to contact a different individual to collect an unpaid debt. The defendants allegedly called the plaintiff’s cell phone number—which was listed as the other individual’s home phone number but had been reassigned to the plaintiff—multiple times even after the plaintiff informed the defendants that they had the wrong phone number. The plaintiff alleged violations of the TCPA, claiming the defendants placed the calls without first obtaining prior express consent.
Among other arguments, the defendants challenged the proposed class definition, which included more than 9,000 non-customers who allegedly received calls from the defendants and were identified by a code that the plaintiff contended is assigned to calls made to “bad phone” numbers. According to the defendants, the plaintiff’s expert developed a process for “identify[ing] calls where [autodialed] calls and prerecorded messages were made to cell phones after a record documenting an event consistent with a wrong number and/or a request to stop calling.” However, the defendants argued, among other things, that there are many different reasons why a “bad phone” code could be assigned to an account, and that the plaintiff’s assertions do not “satisfy the clearly ascertainable standard,” which must be met for class certification.
“Indeed, when presented with similar evidence regarding ‘wrong number’ call log designations, this [c]ourt recognized that ‘in the debt collection industry ‘wrong number’ oftentimes does not mean non-consent because many customers tell agents they have reached the wrong number, though the correct number was called, as a way to avoid further debt collection,’” the court stated. “The difficulty in ascertaining this information is compounded by the fact that the phone numbers at issue were initially provided to [the defendants] by consenting customers.”
District Court: Debt collector must pay $267 million in robocall damages
On September 9, the U.S. District Court for the Northern District of California entered a final judgment against a debt collection agency that was found guilty of violating the TCPA by making more than 500,000 unsolicited robocalls using autodialers. The court’s final judgment is consistent with the jury’s verdict from last May, which identified four classes of individuals: two involving consumers who received skip-tracing calls or pre-recorded messages, and two involving non-debtor consumers who never had debt collection accounts with the defendant but received calls on their cell phones. In a February 2018 order, the court resolved cross motions for summary judgment, affirming that the dialers used by the defendant to place the calls constituted autodialers within the meaning of the TCPA and that the defendant lacked prior express consent to place the calls. Under the more than $267 million final judgment, class members will each receive $500 per call, with one of the named plaintiffs receiving $7,000 for his individual TCPA claim.
District Court says TCPA dismissal bid cannot rely upon Supreme Court ruling
On September 3, the U.S. District Court for the District of New Jersey denied a medical laboratory’s motion to dismiss, ruling that the company cannot use a Supreme Court ruling to avoid a proposed TCPA class action suit concerning allegations that it made unsolicited calls using an “autodialer.” As previously covered by InfoBytes, the court denied the defendant’s motion to dismiss last December after it concluded that the plaintiff sufficiently alleged the equipment used to make unsolicited calls qualified as an “autodialer.” The defendant argued, however, that the court should reconsider its decision in light of a 2019 Supreme Court ruling in which separate concurring opinions written by Justices Kavanaugh and Thomas concluded that district courts are not bound by the FCC’s interpretation of the term “autodialer” under the TCPA. According to the defendant, because of these concurring opinions, the court “was not bound by the FCC’s 2003 and 2008 guidance on the definition of an ‘autodialer,’” and should therefore revisit its prior opinion. However, the court stated that the Supreme Court’s case does not change any of the “controlling law” dealing with the TCPA issue in the current lawsuit. “Because defendant’s arguments are not based on any actual change in controlling law,” its motion for reconsideration is denied, the court stated, noting that concurring opinions “do not change ‘controlling law.’”
District Court allows TCPA class action to proceed against auto company
On August 27, the U.S. District Court for the Central District of California denied a car manufacturer’s motion to dismiss a class action alleging that it violated the TCPA by sending unwanted automated text messages. According to the opinion, after a consumer visited a car dealership, she allegedly received unsolicited text messages to her cell phone from the dealership. The consumer filed a proposed class action alleging the corporate car manufacturer “directed, encouraged, and authorized its dealerships [] to send text messages promoting the sale of [the] automobiles to [the consumer] and other members of the proposed Class, pursuant to a common marketing scheme” and that the text messages were transmitted using an automated telephone dialing system (autodialer) in violation of the TCPA. The manufacturer moved to dismiss the action, arguing that the plaintiff failed to allege (i) that the manufacturer sent the text messages or that the dealership sent the text messages as the manufacturer’s agent; and (ii) that the text messages were sent using an autodialer.
The court first determined that the plaintiff plausibly alleged that the manufacturer directly sent the text messages, or, in the alternative, that the dealership was acting as the manufacturer’s agent when the texts were sent. Furthermore, the plaintiff alleged that the manufacturer used hardware and software programs with the requisite capabilities to qualify as an autodialer pursuant to the 9th Circuit’s decision in Marks v. Crunch San Diego, LLC (covered by InfoBytes here).
District court concludes loan servicer violated TCPA
On August 19, the U.S. District Court for the Western District of Michigan held that a Pennsylvania-based student loan servicing agency violated the TCPA by calling the plaintiffs’ cell phones over 350 times using an automatic telephone dialing system (autodailer) after consent was revoked. According to the opinion, after revoking consent to receive calls via an autodialer, two plaintiffs asserted that the servicer called their cell phones collectively over 350 times in violation of the TCPA and moved for summary judgment seeking treble damages for each violation. In response, the loan servicer argued that the system used to make the calls does not meet the statutory definition of an autodialer under the TCPA and disputed the appropriateness of treble damages.
The court, in disagreeing with the loan servicer, concluded that the system used by the loan servicer to make the calls qualified as an autodialer. The court applied the logic of the U.S. Court of Appeals for the 9th Circuit in Marks v. Crunch San Diego, LLC (covered by InfoBytes here), stating that it was not bound by the FCC’s interpretations of an autodialer, based on the D.C. Circuit’s ruling in ACA International v. FCC, and therefore, “‘only the statutory definition of [autodialer] as set forth by Congress in 1991 remains.’” The court noted that there was “no question” that the system used by the loan servicer “stores telephone numbers to be called and automatically dials those numbers,” which qualifies the system as an autodialer. However, the court determined that the loan servicer did not violate the statute “willfully or knowingly,” noting that at the time of the calls it was not clear from the FCC whether the system being used was an autodialer. As a result, the court awarded statutory damages, but not the treble damages sought by the plaintiffs.
9th Circuit reverses dismissal of TCPA class action against social media company
On June 13, the U.S. Court of Appeals for the 9th Circuit overturned the dismissal of a TCPA putative class action against a social media company, concluding the plaintiff adequately alleged the company sent text messages using an automated telephone dialing system (autodialer) in violation of the TCPA and holding that the “debt-collection exception” excluding calls “made solely to collect a debt owed to or guaranteed by the United States” from TCPA coverage is an unconstitutional restriction on speech. The consumer alleged that he that he had received a text message indicating that his account was accessed from an unrecognized device, although he allegedly was not a user of the social media site and never consented to the alerts.
On appeal, the company challenged the adequacy of the TCPA allegations and, alternatively, argued that the TCPA violates the First Amendment. The 9th Circuit concluded the plaintiff plausibly alleged the company’s text message system fell within the definition of autodialer under the TCPA— using the definition from its September 2018 decision in Marks v. Crunch San Diego, LLC. The appellate court rejected the company’s argument that an “expansive reading” of Marks would encapsulate any smartphone within the definition of autodailer and that the definition should not apply to “purely ‘responsive messages’” such as the text messages in question. The appellate court also agreed with the company— citing to the 4th Circuit’s recent decision in AAPC v. FCC, covered by InfoBytes here— that an exclusion under the TCPA that allows debt collectors to use an autodialer to contact individuals on their cell phones when collecting debts owed to or guaranteed by the federal government violates the First Amendment’s Free Speech Clause. However, the appellate court held that the debt collection exception is severable from the TCPA, and, therefore, declined to strike down the law it its entirety as the company requested.
District Court denies summary judgment for auto financing company in TCPA action
On June 12, the U.S. District Court for the Northern District of Illinois denied an auto financing company’s renewed motion for summary judgment and request for reconsideration, concluding that the company’s calling system falls within the definition of automatic telephone dialing system (autodialer) under the TCPA.
According to the opinion, two separate class actions were filed alleging that the company violated the TCPA when making calls to consumers regarding outstanding auto loans by using an autodailer. In April 2016, the company filed a motion for summary judgment, arguing, among other things, that the calling system it uses does not constitute an autodialer under the TCPA, and moved to stay the proceedings until the D.C. Circuit issued its ruling in a related case, ACA International v. FCC. The court denied the motions but stated that it would “revisit any issues affected by [the ACA International] decision as needed.” In March 2018, the D.C. Circuit issued its ruling in ACA International, concluding that the FCC’s 2015 interpretation of an autodialer was “unreasonably expansive.” (Covered by a Buckley Special Alert here.)
The company then filed the renewed motion for summary judgment and request for reconsideration of the earlier decision. The court denied the motion, concluding that the company’s calling system was an autodialer under the TCPA as a matter of law, because the system automatically dialed numbers from a set customer list. The court applied the logic of the 9th Circuit in Marks v. Crunch San Diego, LLC (covered by InfoBytes here), stating that it was not bound by the FCC’s interpretations of an autodialer based on ACA International, and “[a]s such, ‘only the statutory definition of [autodialer] as set forth by Congress in 1991 remains.’” After reviewing the legislative history of the TCPA, the court determined that “[g]iven Congress’s particular contempt for automated calls and concern for the protection of consumer privacy,” the autodialer definition “includes autodialed calls from a pre-existing list of recipients,” rejecting the company’s argument that an autodialer must have the capacity to generate telephone numbers, not just pull from a preexisting list. Additionally, the court concluded that the system “need not be completely free of all human intervention” to fall under the definition of autodialer.
4th Circuit: TCPA debt collection exemption is unconstitutional
On April 24, the U.S. Court of Appeals for the 4th Circuit vacated a district court’s decision to grant summary judgment in favor of the FCC, concluding that an exemption under the TCPA that allows debt collectors to use an autodialer to contact individuals on their cell phones when collecting debts guaranteed by the federal government violates the First Amendment’s Free Speech Clause. According to the opinion, several political consultant groups (plaintiffs) argued that a statutory exemption enacted by Congress as a means of allowing automated calls to be placed to individuals’ cell phones “that relate to the collection of debts owed to or guaranteed by the federal government” is “facially unconstitutional under the Free Speech Clause” of the First Amendment. The plaintiffs argued that the debt-collection exemption to the automated call ban contravenes their free speech rights. Moreover, the plaintiffs claimed that “the free speech infirmity of the debt-collection exemption is not severable from the automated call ban and renders the entire ban unconstitutional.” The FCC, however, argued that the applicability of the exemption depended on the relationship between the government and the debtor and not on the content. The district court awarded summary judgment in favor of the FCC after applying a “strict scrutiny review,” ruling that the exemption does not violate the Free Speech Clause.
On appeal the 4th Circuit agreed with the plaintiffs that the exemption contravenes the Free Speech Clause, and found that the challenged exemption was a content-based restriction on free speech that did not hold up to strict scrutiny review. “Under the debt-collection exemption, the relationship between the federal government and the debtor is only relevant to the subject matter of the call. In other words, the debt-collection exemption applies to a phone call made to the debtor because the call is about the debt, not because of any relationship between the federal government and the debtor.” And because the exemption is a content-based restriction on speech, it must satisfy strict scrutiny review to be constitutional, which it fails to do, the 4th Circuit opined. “The exemption thus cannot be said to advance the purpose of privacy protection, in that it actually authorizes a broad swath of intrusive calls. . . [and] therefore erodes the privacy protections that the automated call ban was intended to further.” However, the appellate court sided with the FCC to sever the debt collection exemption from the automated call ban. “First and foremost, the explicit directives of the Supreme Court and Congress strongly support a severance of the debt-collection exemption from the automated call ban,” the panel stated. “Furthermore, the ban can operate effectively in the absence of the debt-collection exemption, which is clearly an outlier among the statutory exemptions.”