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  • 11th Circuit: Class action incentive fees are unlawful

    Courts

    On September 17, the U.S. Court of Appeals for the Eleventh Circuit reversed and vacated a district court judgment awarding an “incentive payment” to a TCPA class action representative, concluding it violates a U.S. Supreme Court decision prohibiting such awards. Additionally, the 11th Circuit remanded the case so that the district court could adequately explain its findings on the fees and costs issues. According to the opinion, a consumer initiated a TCPA class action against a collection agency for allegedly calling phone numbers that had originally belonged to consenting debtors but were subsequently reassigned to non-debtors. The action quickly moved to settlement and one class member objected, challenging “the district court’s decision to set the objection deadline before the deadline for class counsel to file their attorneys’-fee petition.” Additionally, among other things, the objector argued that the proposed $6,000 incentive award to the class action representative violates the 1880s Supreme Court decisions in Trustees v. Greenough and Central Railroad & Banking Co. v. Pettus. The district court overruled the class member’s objections.

    On appeal, the 11th Circuit concluded that the district court “repeated several errors” that “have become commonplace in everyday class-action practice.” Specifically, the appellate court held that the district court “violated the plain terms of Federal Rule of Civil Procedure 23(h)” by setting the settlement objection date more than two weeks before the date class counsel had to file their attorneys’ fee petition. The appellate court also concluded that the district court violated the Supreme Court’s rule from Greenough and Pettus, which provides that “[a] plaintiff suing on behalf of a class can be reimbursed for attorneys’ fees and expenses incurred in carrying on the litigation, but he cannot be paid a salary or be reimbursed for his personal expenses.” The 11th Circuit noted that modern day incentive awards pose even more risks than the concerns from Greenough, promoting “litigation by providing a prize to be won.” Thus, according to the appellate court, although incentive awards may be “commonplace” in class action litigation, they are not lawful and therefore, the district court’s decision must be reversed.

    Courts Eleventh Circuit TCPA Class Action Settlement U.S. Supreme Court

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  • 2nd Circuit denies arbitration for sandwich chain in TCPA action

    Courts

    On September 15, the U.S. Court of Appeals for the Second Circuit affirmed the district court’s denial of arbitration, concluding that a national sandwich chain’s website did not provide sufficient notice of the terms and conditions. According to the opinion, a consumer filed a TCPA action against the sandwich chain relating to unsolicited text messages he received after he entered his phone number on a promotional page of the company’s website in order to receive a free sandwich at his next visit. After entering his number, the consumer clicked a button stating “I’M IN,” which the sandwich chain argued “constituted assent to the terms and conditions contained on a separate webpage that was accessible via a hyperlink on the promotional page.” The terms and conditions included an agreement to arbitrate. The sandwich chain moved to compel arbitration of the consumer’s TCPA action and the district court denied the motion, finding that no arbitration agreement existed because “the terms and conditions were not reasonably clear and conspicuous on the promotional page itself.”

    On appeal, the 2nd Circuit agreed with the district court, noting that the webpage “was relatively cluttered.” Specifically, the appellate court noted that the webpage lacked language “informing the user that by clicking ‘I’M IN’ the user was agreeing to anything other than the receipt of a coupon.” Moreover, the appellate court held that the link to the terms and conditions was not conspicuous to a reasonable user as it was in small font at the bottom of the page and was “introduced by no language other than the shorthand ‘T & Cs.’” Because the company did not provide sufficient evidence demonstrating the consumer’s knowledge of the terms and conditions, the appellate court affirmed the denial of arbitration.

    Courts Appellate Second Circuit TCPA Arbitration

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  • District court: $925 million statutory damages award not constitutionally excessive

    Courts

    On August 14, the U.S. District Court for the District of Oregon refused to reduce a $925 million statutory damages award against a company found to have violated the TCPA by sending almost two million unsolicited robocalls to consumers. The company argued that the statutory damages award violates due process because “it is so severe and oppressive as to be wholly disproportionate to the offense and obviously unreasonable.” The court rejected the company’s argument that the penalty was unconstitutionally excessive, noting that the U.S. Court of Appeals for the Ninth Circuit has not yet answered the question as to “whether due process limits the aggregate statutory damages that can be awarded in a class action lawsuit under the TCPA.” Instead, the district court concluded that the allowance for at least $500 per violation under the TCPA is constitutionally valid and that the penalty’s “large aggregate number comes from simple arithmetic.” Referencing an opinion issued by the U.S. Court of Appeals for the Seventh Circuit, the court reasoned that “[s]omeone whose maximum penalty reaches the mesosphere only because the number of violations reaches the stratosphere can’t complain about the consequences of its own extensive misconduct.” Thus, the court rejected the company’s argument that the aggregate damages award should be reduced, finding that due process does not require the reduction of the aggregate statutory award where the company violated the TCPA nearly two million times.

    Courts Robocalls TCPA Settlement

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  • 4th Circuit: Arbitration agreement applies to acquired company

    Courts

    On August 7, the U.S. Court of Appeals for the Fourth Circuit issued a split opinion vacating a district court’s decision against arbitration in a proposed class action, which accused a satellite TV provider (defendant) of violating the TCPA by allegedly making automated and prerecorded telemarketing calls to an individual even though her number was on the National Do Not Call Registry. The plaintiff filed a lawsuit against the defendant and several other entities and individuals seeking class certification as well as statutory damages and injunctive relief. The defendant moved to compel arbitration, claiming that the plaintiff’s dispute was covered by an arbitration agreement in the contract governing her cell phone service with a telecommunications company, which is an affiliate of the defendant. The district court denied the request, ruling that the allegations “did not fall within the scope of the arbitration agreement.” The plaintiff appealed, “defend[ing] the district court’s scope ruling,” but arguing that no agreement was formed.

    On appeal, the majority concluded that not only did the plaintiff form an agreement to arbitrate with the defendant, the allegations fit within the broad scope of the arbitration agreement. Specifically, the appellate court determined that an arbitration agreement signed by the plaintiff with the telecommunications company in 2012 when she opened a new line of service was extended to potential TCPA allegations against the defendant when the telecommunications company acquired the defendant in 2015. Even though the acquisition happened several years after the plaintiff signed the contract, the majority stated the arbitration agreement had a “forward-looking nature” and that it seemed unlikely that the telecommunications company and its affiliates “intended to restrict the covered entities to those existing at the time the agreement was signed.” According to the majority, “[w]e need not define the outer limits of this arbitration agreement to conclude, based on the arbitration provisions and the contract as a whole, that [the plaintiff’s] TCPA claims about [the defendant’s] advertising calls fall within its scope.” As to the plaintiff’s argument that she only signed the account on behalf of her husband who was the account holder, the majority said the agreement covered “all authorized or unauthorized users,” which the plaintiff was at the time.

    Courts Appellate Fourth Circuit TCPA Arbitration

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  • 6th Circuit affirms expansive autodialer definition

    Courts

    On July 29, the U.S. Court of Appeals for the 6th Circuit affirmed summary judgment in favor of the plaintiffs in a TCPA action, holding that a device used by a student loan servicer that only dials from a stored list of numbers qualifies as an automatic telephone dialing system (“autodialer”). According to the opinion, a borrower and co-signer sued the student loan servicer alleging the servicer violated the TCPA by using an autodialer to place calls to their cell phones without consent. The district court granted summary judgment in favor of the plaintiffs and awarded over $176,000 in damages. On appeal, the servicer argued that the equipment used did not qualify as an autodialer under the TCPA’s definition, because the calls are placed from a stored list of numbers and are not “randomly or sequentially” generated. The 6th Circuit rejected this argument, joining the 2nd and 9th Circuits, holding that under the TCPA, an autodialer is defined as “equipment which has the capacity—(A) to store [telephone numbers to be called]; or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” This decision is in conflict with holdings by the 3rd, 7th, and 11th Circuits, which have held that autodialers require the use of randomly or sequentially generated phone numbers, consistent with the D.C. Circuit’s holding that struck down the FCC’s definition of an autodialer in ACA International v. FCC (covered by a Buckley Special Alert).

    As previously covered by InfoBytes, the U.S. Supreme Court recently agreed to address the definition of an autodialer under the TCPA, which will resolve the split among the circuits.

    Courts Appellate Sixth Circuit Autodialer TCPA FCC

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  • Supreme Court to review FHFA structure, FTC restitution, and TCPA autodialing

    Courts

    On July 9, the U.S. Supreme Court agreed to review the following cases:

    • FHFA Constitutionality. The Court agreed to review the U.S. Court of Appeals for the Fifth Circuit’s en banc decision in Collins. v. Mnuchin (covered by InfoBytes here), which concluded that the FHFA’s structure—which provides the director with “for cause” removal protection—violates the Constitution’s separation of powers requirements. As previously covered by a Buckley Special Alert last month, the Court held that a similar clause in the Dodd-Frank Act that requires cause to remove the director of the CFPB violates the constitutional separation of powers. The Court further held that the removal provision could—and should—be severed from the statute establishing the CFPB, rather than invalidating the entire statute.
    • FTC Restitution Authority. The Court granted review in two cases: (i) the 9th Circuit’s decision in FTC V. AMG Capital Management (covered by InfoBytes here), which upheld a $1.3 billion judgment against the petitioners for allegedly operating a deceptive payday lending scheme and concluded that a district court may grant any ancillary relief under the FTC Act, including restitution; and (ii) the 7th Circuit’s FTC v. Credit Bureau Center (covered by InfoBytes here), which held that Section 13(b) of the FTC Act does not give the FTC power to order restitution. The Court consolidated the two cases and will decide whether the FTC can demand equitable monetary relief in civil enforcement actions under Section 13(b) of the FTC Act.
    • TCPA Autodialer Definition. The Court agreed to review the U.S. Court of Appeals for the Ninth Circuit’s decision in Duguid v. Facebook, Inc. (covered by InfoBytes here), which concluded the plaintiff plausibly alleged the social media company’s text message system fell within the definition of autodialer under the TCPA. The 9th Circuit applied the definition from their 2018 decision in Marks v. Crunch San Diego, LLC (covered by InfoBytes here), which broadened the definition of an autodialer to cover all devices with the capacity to automatically dial numbers that are stored in a list. The 2nd Circuit has since agreed with the 9th Circuit’s holding in Marks. However, these two opinions conflict with holdings by the 3rd, 7th, and 11th Circuits, which have held that autodialers require the use of randomly or sequentially generated phone numbers, consistent with the D.C. Circuit’s holding that struck down the FCC’s definition of an autodialer in ACA International v. FCC (covered by a Buckley Special Alert).

    Courts FHFA Single-Director Structure TCPA Appellate FTC Restitution FTC Act Autodialer Ninth Circuit Seventh Circuit Fifth Circuit D.C. Circuit Third Circuit Eleventh Circuit

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  • District court preliminarily approves $6.8 million TCPA settlement

    Courts

    On July 6, the U.S. District Court for the Eastern District of California granted preliminary approval to a nearly $6.8 million settlement between class members and a collection agency that allegedly violated the TCPA, FDCPA, and California’s Rosenthal Fair Debt Collection Practices Act by making calls using an autodialer or prerecorded voice in an attempt to collect purported debts. The lead plaintiff filed a proposed class action suit in 2016 against the collection agency claiming he received at least 25 calls to his cell phone even though he never consented to receiving such calls in the first place and had instructed the collection agency to stop calling him.

    According to the court’s order, the settlement consists of two sub-classes: (i) one class of individuals from anywhere in the U.S. who subscribed to call management applications and received automated calls from the defendant without providing the proper consent; and (ii) another class of individuals living in California who received automated calls from the defendant regarding their purported debts. The terms of the settlement provides for a $1.8 million cash fund and requires the forgiveness of nearly $5 million in outstanding debts for class members with existing accounts owned by either the collection agency or one of its affiliates.

    Courts Robocalls Settlement Class Action State Issues Autodialer TCPA FDCPA

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  • Supreme Court keeps TCPA, severs government-debt exception as unconstitutional

    Courts

    On July 6, the U.S. Supreme Court held in Barr v. American Association of Political Consultants Inc. that the TCPA’s government-debt exception is an unconstitutional content-based speech restriction and severed the provision from the remainder of the statute. As previously covered by InfoBytes, several political consultant groups (plaintiffs) argued that the TCPA’s 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, which the U.S. Court of Appeals for the Fourth Circuit vacated, concluding the exemption violated the First Amendment’s Free Speech Clause.

    In a plurality opinion, the Supreme Court agreed with the 4th Circuit. The Court noted that “a law is content-based if ‘a regulation of speech ‘on its face’ draws distinctions based on the message a speaker conveys’”; and a law that allows for robocalls asking for payment of government debt but does not allow robocalls for political donations, “is about as content-based as it gets.” The Court agreed with the government that the content-based restriction failed to satisfy strict scrutiny, as the government could not sufficiently justify the difference “between government-debt collection speech and other categories of robocall speech.” As for remedy, the Court applied “traditional severability principles,” with seven Justices concluding that the entire TCPA should not be invalidated but that the government-debt exception should be severed from the statute. The Court noted that its cases have “developed a strong presumption of severability,” and its “power and preference to partially invalidate a statute in that fashion has been firmly established since Marbury v. Madison.” Moreover, because the government-debt exception is “relatively narrow exception” to the TCPA’s broad robocall restriction, the Court concluded that severing the exception would “not raise any other constitutional problems.”

    Courts U.S. Supreme Court TCPA Autodialer Debt Collection FCC Appellate Fourth Circuit First Amendment

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  • FCC narrows “autodialer” definition

    Agency Rule-Making & Guidance

    On June 25, the FCC narrowed the Commission’s definition of an “autodialer,” providing that “if a calling platform is not capable of originating a call or sending a text without a person actively and affirmatively manually dialing each one, that platform is not an autodialer and calls or texts made using it are not subject to the TCPA’s restrictions on calls and texts to wireless phones.” The FCC reiterated that only sequential number generators or other systems that can store or produce numbers to be called or texted at random are the only technologies considered to be autodialers. The FCC further noted that whether a system can make a large number of calls in a short period of time does not factor into whether the system is considered an autodialer, and that message senders may avoid TCPA liability by obtaining prior express consent from recipients. The FCC issued the ruling in response to an alliance’s 2018 petition, which asked the FCC to clarify whether the definition of an autodialer applied to peer-to-peer messaging (P2P) platforms that, among other things, allow organizations to text a large number of individuals and require a person to manually send each text message one at a time. The FCC declined to rule on whether any particular P2P text platform is an autodialer due to the lack of sufficient factual basis.

    The FCC issued a separate declaratory ruling the same day reiterating that the TCPA requires autodialer or robocall senders to obtain prior express consent before making any texts or robocalls, stressing that the “mere existence of a caller-consumer relationship does not satisfy the prior-express-consent requirement for calls to wireless numbers, nor does it create an exception to this requirement.” The ruling was issued in response to a health benefit company’s 2015 petition, which asked the FCC to exempt health plans and providers, as well as certain non-emergency, urgent health care-related calls, from the prior consent requirement as long as the company permitted consumers to opt out after the fact.

    As previously covered by InfoBytes, several appellate courts have issued conflicting decisions with respect to the definition of an autodialer.

    Agency Rule-Making & Guidance FCC Autodialer TCPA

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  • District court holds text system is not an autodialer under 7th Circuit definition

    Courts

    On June 15, the U.S. District Court for the Southern District of Indiana granted a motion for summary judgment in favor of a collection agency and another company (collectively, “defendants”) with respect to the plaintiff’s TCPA allegations, holding that the system used to send text messages to class members’ cell phones is not an automatic telephone dialing system (autodialer). According to the opinion, the plaintiff filed the class action alleging, among other things, that the defendants violated the TCPA by sending unsolicited text messages using an autodialer to cell phones after the recipients replied with “stop.” The parties submitted cross-motions for summary judgment, which were stayed pending the outcome of the U.S. Court of Appeals for the Seventh Circuit decision in Gadelhak v. AT&T Servs., Inc. As previously covered by InfoBytes, the 7th Circuit held in February that to be an autodialer under the TCPA, the system must both store and produce phone numbers “using a random or sequential number generator.” After reviewing the cross-motions in light of the 7th Circuit decision, the court concluded that the system used by the defendants is not an autodialer under the controlling definition because the defendants’ system sends text messages to cell phone numbers from stored customer lists. Notwithstanding the fact that neither party disputes that the text messages sent to the class members post-“stop” message were without their consent, the court granted summary judgment in favor of the defendants because the text messages were not sent using an autodialer.

    Courts Appellate Seventh Circuit TCPA Autodialer

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