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Court denies plaintiff’s motion for summary judgment in TCPA action, questions accuracy of report citing number of robocalls
On May 21, the U.S. District Court for the Southern District of California denied a plaintiff’s motion for summary judgment against a solar company that she claimed made multiple unwanted robocalls to her cell phone, holding that questions remained about the accuracy of a report identifying the number of illegal calls the company allegedly placed. The plaintiff filed a putative class action complaint asserting that the company, in order to market products and services, violated the Telephone Consumer Protection Act (TCPA) when it used a “predictive dialer” to contact cell phone numbers the company bought from third parties. The plaintiff further claimed that none of the alleged call recipients had provided prior express consent to receive the calls, and that an expert retained by the plaintiff found that the company had made 897,534 calls to 220,007 unique cell phones. After the class was certified, the plaintiff moved for summary judgment, requesting that class members be awarded damages available under the TCPA of $1,500, or $500 per call.
While the court determined that there is no argument as to the plaintiff’s TCPA claim concerning whether the company made telemarketing calls (and failed to receive prior express consent), a dispute remained over whether the plaintiff had “carried its burden of demonstrating” that the high number of calls cited in the report were actually made. First, the court stated that, because the company “stipulated that the [p]laintiff’s expert in fact reached a certain conclusion, it does not follow that [the company] stipulated to the accuracy of the conclusion.” Second, the court held that, since a reasonable jury could find the report’s “conclusions are flawed for any number of reasons,” a fact issue as to the report’s accuracy remained. A settlement conference has been set for June 6.
Court enters default judgment in favor of CFPB against debt relief companies
On May 22, the U.S. District Court for the District of Maryland entered a default judgment, in favor of the CFPB, against two debt relief companies, their service provider, and their owners (defendants) for allegedly misleading consumers about their debt validation program. As previously covered by InfoBytes, the CFPB filed a complaint in October 2017 against the defendants for allegedly violating the Telemarketing Sales Rule and the Consumer Financial Protection Act by, among other things, purportedly claiming to be affiliated with the federal government and misrepresenting the abilities of their services. In granting the CFPB’s request for default judgment, the court held that the defendants failed to defend the action and ordered they pay almost $5 million in restitution, as well as $16 million in civil money penalties. In addition to the fines, the defendants are prohibited from engaging in telemarketing, debt relief and credit repair activities in the future.
Supreme Court of Appeals for West Virginia upholds summary judgment for consumer against check cashing company
On May 11, the Supreme Court of Appeals of West Virginia affirmed summary judgment for a consumer who alleged a check cashing company and its debt collector violated the West Virginia Consumer Credit and Protection Act (WVCCPA) by contacting her multiple times after being notified of her Chapter 7 bankruptcy filing. According to the opinion, the consumer filed a Chapter 7 petition for bankruptcy in February 2012 and the cash checking company was notified on or about March 6, 2012 of the filing. On March 9, the company, in response to the bankruptcy notice, sent a letter to the consumer notifying her collection efforts would be stayed but the company would be pursuing a criminal complaint against her. Additionally, a debt collection agency under contract with the company contacted the consumer five additional times in attempt to collect the debt. The trial court first granted the consumer’s motion for summary judgment in part, finding that the company violated the WVCCPA by not contacting the consumer’s attorney and by threatening criminal prosecution even though the company was aware of the bankruptcy filing. The court awarded the consumer over $19,000 in statutory damages. Subsequently, the trial court granted the consumer’s second motion for summary judgment, holding, among other things, that the company instructed the debt collector to contact the consumer despite having “actual knowledge” that an attorney represented the consumer. The court granted additional statutory damages in the amount of $18,000 and awarded attorney’s fees and costs.
Upon appeal, the Supreme Court of Appeals concluded that the check cashing company’s violations of the WVCCPA were deliberate and intentional, and therefore, the trial court did not abuse its discretion by awarding the consumer over $37,000 in damages and attorney’s fees.
Court holds text message advertisements sent by internet domain provider do not violate TCPA
On May 14, the U.S. District Court for the District of Arizona granted an internet domain provider’s motion for summary judgment, holding that the platform used by the company to send text message advertisements did not qualify as an “autodialer” under the Telephone Consumer Protection Act (TCPA). The plaintiff filed a putative class action in 2016 asserting that the company, without his consent, sent him a single text message offering a discount on new products in violation of the TCPA. The company filed for summary judgment arguing that the platform it uses to send messages is not an “autodialer.” Citing to the recent D.C. Circuit decision in ACA International v. the FCC (covered by a Buckley Sandler Special Alert) which narrowed the FCC’s 2015 interpretation of “autodialer”, the Court agreed with the company. The Court held that the text was not sent automatically or without human intervention because the company had to “log into the system, create a message, schedule a time to send it, and perhaps most importantly, enter a code to authorize its ultimate transmission.”
As covered by InfoBytes, the FCC’s Consumer and Governmental Affairs Bureau released a notice seeking comment on the interpretation of the Telephone Consumer Protection Act (TCPA) in light of the recent D.C. Circuit decision in ACA International.
3rd Circuit reverses district court’s decision, rules TILA provisions misapplied to unauthorized-charge suit
On May 16, the U.S. Court of Appeals for the 3rd Circuit reversed a district court’s decision, holding that the lower court, among other things, misapplied a TILA provision under Regulation Z that requires cardholders to dispute charges within 60 days of the “first periodic statement that reflects the alleged billing error.” According to the opinion, the plaintiff-appellant filed a suit against the bank after he was allegedly rebilled for a $657 fraudulent money transfer charge that originally appeared on his statement in July 2015. The charge was originally removed from his account but reappeared in mid-September of that year after the bank claimed the charge was valid after verifying transaction details. The plaintiff-appellant challenged the decision in writing, and later filed a complaint against the bank, alleging he had “timely submitted a written notice of billing error,” and that the bank “had neither credited the charge nor conducted a reasonable investigation” and imposed liability of more than $50. The district court dismissed the complaint with prejudice for failure to state a claim, which the plaintiff appealed.
At issue, the three-judge panel determined, were two provisions under TILA: (i) the “Fair Credit Billing Act” (FCBA), which stipulates that creditors must “comply with particular obligations when a consumer has asserted that his billing statement contains an error,” and (ii) the “unauthorized-use provision,” which requires certain conditions to be met before a credit card issuer can hold the cardholder liable, up to a limit of $50, for any unauthorized use. The panel first addressed the district court’s finding that the bank’s obligations under FCBA were “never triggered” because his written notice came 63 days after the July statement first included the charge. The panel held that, because the plaintiff-appellant’s August billing statement showed a credit to his account for the charge and that “there was no longer anything to dispute” and no reason to believe his statement contained a billing error, the 60-day time limit should have started when the bank rebilled him in September. In addressing the second issue, the district court held that plaintiff-appellant was not entitled to “reimbursement” under the unauthorized-use claim. However, the panel opined that he was not seeking reimbursement but rather “actual damages,” for which the statute does provide relief. “We conclude that a cardholder incurs ‘liability’ for an allegedly unauthorized charge when the issuer, having reason to know the charge may be unauthorized, bills or rebills the cardholder for that charge,” the panel wrote.
3rd Circuit holds FDCPA statute of limitations begins to run on occurrence, not discovery, of violations, splitting from 4th and 9th Circuits
On May 15, the U.S. Court of Appeals for the 3rd Circuit issued an en banc ruling that the statute of limitations on the ability to sue for a violation of the Fair Debt Collection Practices Act (FDCPA) is one year from the date the Act is violated. The ruling is a departure from contrary decisions issued by the 4th and 9th Circuits, which both held that the statute of limitations begins to run when a violation is discovered, not when it occurs.
Citing the FDCPA’s provision that claims must be filed “within one year from the date on which a violation occurs,” the court found that intent of the FDCPA is that the statute of limitations should begin to run at the moment the alleged wrongdoing happens, and not when the cause of action is discovered. The Court found that the 4th and 9th Circuits’ decisions to the contrary failed to analyze the “violation occurs” language of the statute.
However, the court noted that its holding does not serve to undermine the doctrine of equitable tolling, and “should not be read to foreclose the possibility that equitable tolling might apply to FDCPA violations that involve fraudulent, misleading, or self-concealing conduct.” This question was not addressed, the court noted, because the plaintiff-appellant failed to preserve the issue on appeal.
9th Circuit will not rehear interest on escrow preemption decision
On May 16, a panel of three judges on the U.S. Court of Appeals for the 9th Circuit denied the petition for an en banc rehearing of its March decision, which held that a California law that requires a bank to pay interest on escrow funds is not preempted by federal law. In addition to the national bank’s appeal for a rehearing, the OCC notably filed an amicus brief supporting the rehearing, arguing that the court “comprehensively misinterpreted” the Supreme Court’s 1996 decision Barnett Bank of Marion County v. Nelson. (Previously covered by InfoBytes here.) The panel noted that the full court had been advised of the bank’s petition for rehearing, and no judge had requested a vote on rehearing.
D.C. Circuit rejects challenge to FTC’s 2016 staff letter on soundboard technology
On April 27, the U.S. Court of Appeals for the D.C. Circuit dismissed a challenge to a November 2016 FTC staff letter, which announced the FTC would treat calls using soundboard technology as robocalls. According to the D.C. Circuit opinion, the FTC’s 2016 staff letter rescinded a 2009 staff letter, which reached the conclusion that soundboard technology was not subject to robocall regulation. The Soundboard Association filed suit, seeking to enjoin the rescission of the 2009 letter, arguing that the 2016 staff letter violated the Administrative Procedures Act (APA) by issuing a legislative rule without notice and comment and that it unconstitutionally restricted speech in violation of the First Amendment. The lower court granted summary judgment for the FTC holding that the 2016 letter did not violate the First Amendment and that the letter was an interpretive rule and therefore not subject to the notice and comment requirements of the APA. Upon appeal, the D.C. Circuit vacated the lower court’s decision and dismissed the action in its entirety, holding that the 2016 letter was not a “final agency action” and therefore, the plaintiffs failed to state a cause of action under the APA.
District Court rules that Federal Reserve Banks are not federal agencies under False Claims Act
On May 9, the U.S. District Court for the Eastern District of New York dismissed a qui tam action brought under the False Claims Act (FCA) against a national bank and its predecessors-in-interest (defendants), which alleged that the defendants presented false information to Federal Reserve Banks (FRBanks) in connection with their applications for loans. The court held that allegations of false or fraudulent claims being presented to the FRBanks cannot form the basis of an FCA action because the FRBanks cannot be characterized as the federal government for purposes of the FCA.
The relators in the action originally brought a whistleblower lawsuit against the bank, alleging that the defendants inaccurately represented their financial condition in order to be eligible to borrow from the FRBanks’ discount window at lower interest rates. By way of background, in order for liability to incur under the FCA, a false or fraudulent claim must be made to the federal government or its agents. Therefore, the court needed to resolve two legal issues: (i) whether FRBanks should be characterized as the government or its agents for purposes of the FCA, and (ii) whether the federal government paid any portion of the loans the defendants received or reimbursed the FRBanks for issuing the loans.
In supporting its conclusion that FRBanks are not government actors, the court reasoned that the Federal Reserve Act (FRA), which created the Federal Reserve districts and FRBanks, did not designate the FRBanks as part of an executive department or agency. The court also noted that although the Federal Reserve Board of Governors (Board) is a federal agency, each FRBank operates as a private corporation owned by private stockholders, receives no government appropriations, and generates its own income from interest earned on government securities. Furthermore, the court reasoned that the Board provides only general policy supervision, FRBank employees are not government employees, and FRBanks lack the ability to promulgate regulations and operate independently of the Board and the government.
In resolving the second issue, the court agreed with the defendants’ argument that the bank’s loan requests did not create FCA liability for claims, because the relators did not, and could not, “allege that the [g]overnment either provided any portion of the money loaned to the defendants, or reimbursed [FRBanks] for making the loans.”
Supreme Court says states can legalize sports gambling
On May 14, the U.S. Supreme Court held that the 1992 Professional and Amateur Sports Protection Act (PASPA), which, among other things, bans most states from authorizing sports gambling, violates the 10th Amendment “anticommandeering” principle. The decision results from a lawsuit filed by the National Collegiate Athletic Association (NCAA) and four major professional sports leagues alleging that a 2012 New Jersey state law legalizing sports betting violated PASPA. The district court and the U.S. Court of Appeals for the 3rd Circuit agreed with the NCAA and New Jersey revised the law in 2014. The new law removed existing bans on sports gambling at horseracing tracks, casinos, and gambling houses in Atlantic City as long as the wagers did not involve New Jersey college teams or a collegiate event in the state. The NCAA filed suit again and the district court, with the 3rd Circuit affirming, held that the revised law violated PASPA. New Jersey appealed to the Supreme Court, arguing that PASPA violates the “anticommandeering” principle of the Constitution.
In a 7-2 vote, the Supreme Court reversed the lower court’s decision, holding that the PASPA provision, which prohibits state authorization of sports gambling, “unequivocally dictates what a state legislature may and may not do.” The Court rejected the NCAA’s argument that PASPA preempts, not commandeers, state laws that conflict with its provisions, concluding that preemption applies to private actors and the prohibition cannot be understood “as anything other than a direct command to the States.” The Court went on to hold that no provision of PASPA is severable from the anti-authorization provision and, therefore, the entire law should be struck down. The majority acknowledged that the legalization of sports gambling is an important, yet controversial, policy choice but not a choice for the Court to make. “Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own.”