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Financial Services Law Insights and Observations


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  • 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.

    Courts Ninth Circuit TCPA Autodialer ACA International

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  • 4th Circuit upholds certification of TCPA class action against satellite provider


    On May 30, the U.S. Court of Appeals for the 4th Circuit held that a lower court correctly certified a class of individuals who claimed a satellite provider (defendant) violated the TCPA when its authorized sales representative routinely placed telemarketing calls to numbers on the national Do-Not-Call registry. The plaintiff-appellee alleged that because his number was on the registry, the calls were not only annoying but illegal. He therefore filed a lawsuit against the defendant for violations of the TCPA, and in 2018, the court issued a final judgment upholding a jury’s verdict as to both liability and damages for a class of 18,066 members, tripling the damages to more than $61 million. The defendant appealed the verdict asserting that the class definition was too broad in that included uninjured consumers. Specifically, the defendant argued that the definition should be limited to telephone subscribers or the person who actually received the calls. The defendant further asserted on appeal that it was not responsible for the sales representative’s actions.

    On appeal, the 4th Circuit affirmed the lower court’s judgment, stating that it saw “no basis for imposing such a limit,” on the class definition given that “[t]he text of the TCPA notes that it was intended to protect ‘consumers,’ not simply ‘subscribers.’” Concerning the defendant’s argument that it was not responsible for the violations, the appellate court noted that the sales representative’s “entire business model was to make calls like these on behalf of television service providers,” like the defendant, which the defendant knew were being placed on its behalf.

    Courts Appellate Fourth Circuit Privacy/Cyber Risk & Data Security TCPA Robocalls

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  • 3rd Circuit: Commercial purpose does not make unsolicited fax an advertisement under TCPA


    On May 28, the U.S. Court of Appeals for the 3rd Circuit, in a consolidated action, affirmed summary judgment that a health care provider database company’s (defendant) unsolicited fax did not violate the TCPA. According to the opinion, the defendant updated its database by sending unsolicited faxes to healthcare providers, requesting that they voluntarily update their contact information, if necessary. The fax included disclaimers that there was no cost to the recipient for participating in the database maintenance initiative and that it was not an attempt to sell a product. The plaintiff sued the defendant alleging a state law claim and that the fax violated the TCPA’s prohibition on sending unsolicited advertisements by fax. The district court entered summary judgment in favor of the defendant and declined to exercise jurisdiction over the state law claim.

    On appeal, the 3rd Circuit affirmed the district court’s judgment, rejecting the plaintiff’s third-party liability argument that the fax should be regarded as an advertisement, even though he was not a purchaser of the company’s services. The 3rd Circuit held that to establish third-party based liability under TCPA, the “plaintiff must show that the fax: (1) sought to promote or enhance the quality or quantity of a product or services being sold commercially; (2) was reasonably calculated to increase the profits of the sender; and (3) directly or indirectly encouraged the recipient to influence the purchasing decisions of a third party.” The appellate court found that, even though the defendant had a “profit motive” in sending the fax because it wanted to improve the quality of its product by making its database more accurate, “the faxes did not attempt to influence the purchasing decisions of any potential buyer,” nor did the fax encourage the recipient to influence the purchasing decisions of a third party.

    Courts Appellate Third Circuit TCPA

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  • 2nd Circuit: Unsolicited text messages are sufficient injury under TCPA


    On April 30, the U.S. Court of Appeals for the 2nd Circuit held that the receipt of unsolicited text messages, absent any additional injury, is sufficient to demonstrate injury-in-fact in a TCPA class action. According to the opinion, consumers filed a class action lawsuit against a retail store for sending unsolicited text messages in violation of the TCPA. The district court approved a settlement between the parties and certified the class despite various objections, including one from a third-party defendant who argued the consumers lacked standing under the 2016 Supreme Court opinion Spokeo, Inc. v. Robins, because “they alleged only a bare statutory violation and statutory damages cannot substitute for concrete harm.”

    On appeal, the appellate court first rejected the third-party defendant’s standing to appeal the district court’s decision because it had not been “‘formally strip[ped]’ of any claim or defense, it lacks standing to pursue its appeal” in the underlying class action. Notwithstanding the lack of standing by the third-party defendant, the appellate court then went on to address the jurisdictional standing issues raised against the consumers. The court reasoned that, even though the third party that raised the jurisdictional question had been dismissed, the court had an “independent obligation to satisfy [itself] of the jurisdiction” of the appellate and district court. The appellate court concluded that the consumers sufficiently alleged “nuisance and privacy invasion” by the unsolicited text messages, which “are the very harms with which Congress was concerned when enacting the TCPA.” Because the harms identified are “of the same character as harms remediable by traditional causes of action,” the appellate court held the consumers sufficiently demonstrated injury-in-fact as required by Article III.

    Courts TCPA Appellate Second Circuit Spokeo Privacy/Cyber Risk & Data Security Class Action

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  • FDIC fines banks for TCPA, BSA violations; releases March enforcement actions

    Federal Issues

    On April 26, the FDIC announced a list of administrative enforcement actions taken against banks and individuals in March. The 13 orders include “three consent orders; two orders terminating consent orders; four Section 19 orders; one removal and prohibition order; two voluntary terminations of insurance orders; and two orders to pay civil money penalty.” The FDIC assessed, among other things, a $200,000 civil money penalty against an Oklahoma-based bank for allegedly violating the FTC Act and the TCPA by (i) using telemarketers who misrepresented themselves as employees or affiliates of the federal government; and (ii) placing calls to consumers who appeared on the National Do Not Call Registry or who requested to be added to the bank’s internal Do Not Call List.

    The FDIC also assessed a consent order against an Illinois-based bank related to alleged weaknesses in its Bank Secrecy Act (BSA) compliance program. Among other things, the bank is ordered to (i) designate a senior official to enforce and take corrective action related to its BSA compliance policy; (ii) implement a revised, comprehensive written BSA compliance program and system of internal controls to address provisions, including currency transaction reporting, customer identification program, beneficial ownership, and information sharing requirements; (iii) adopt a written Customer Due Diligence Program to assure the reasonable detection of suspicious activity, specifically for money services businesses and privately-owned ATM customers; (iv) implement a process for account transaction monitoring; (v) implement a comprehensive BSA training program for appropriate personnel; (vi) conduct a look back review to ensure certain transactions were appropriately identified and reported; and (vii) revise its internal control programs to correct the identified deficiencies.

    Federal Issues FDIC Enforcement TCPA Bank Secrecy Act

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  • 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.”

    Courts Fourth Circuit Appellate TCPA Autodialer FCC

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  • District Court rejects business owners’ Do Not Call Registry TCPA claims


    On April 16, the U.S. District Court for the Eastern District of Pennsylvania granted in part and denied in part a telemarketing company’s motion to dismiss, concluding that the plaintiff did not have standing to bring some of his claims under the TCPA. According to the opinion, the plaintiff filed a lawsuit against the company for various claims under the TCPA, alleging that he received ten calls from the company to a phone number he had listed on the “National Do Not Call Registry” (Registry), nine of which were allegedly placed using an automatic dialing system (autodialer). The plaintiff requested orally, and later in writing, that the company cease calling the number, but the company allegedly continued to do so. The company moved to dismiss the action, arguing that the plaintiff created a business model to “encourage telemarketers to call his cellphone number so that he can later sue the telemarketers under the TCPA,” and therefore, has not suffered an injury-in-fact that the TCPA was designed to protect. The court agreed with the company on two claims related to the Registry, holding that the plaintiff does not have standing to bring claims under the TCPA’s prohibition of contacting numbers on the Registry because the phone was for business use and “business numbers are not permitted to be registered on the [Registry].” The court denied the motion to dismiss as to the remaining TCPA claims and ordered the company to respond.

    Courts TCPA Do Not Call Registry Autodialer

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  • District Court approves final $7.5 million TCPA class action settlement with payment processor


    On April 16, the U.S. District Court for the Northern District of California granted final approval to a $7.5 million class action settlement resolving allegations that a payment processor and its sales representative violated the TCPA by using an autodialer for telemarketing purposes without first obtaining consumers’ prior express consent. The settlement terms also require the defendants to pay roughly $1.8 million in attorneys’ fees. According to the second amended complaint, the sales representative placed pre-recorded calls to potential clients on behalf of the payment processor through the use of an autodialer, including consumers who had not consented to receiving the calls. The plaintiff further alleged that the payment processor also violated the TCPA by sending facsimile advertisements that did not contain a “Compliant Opt Out Notice” to recipients. The parties reached a preliminary settlement last August following discovery and mediation.

    Courts TCPA Payment Processors Class Action Settlement Autodialer

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  • District Court rejects alarm company’s bid to escape vicarious liability under TCPA


    On April 3, the U.S. District Court for the Northern District of West Virginia denied an alarm company’s motion for summary judgment in multi-district litigation consisting of approximately 30 cases alleging the company is vicariously liable for the telemarketing conduct of its authorized retailers in violation of the TCPA. The company moved for summary judgment arguing, among other things, that it is not a “seller” governed by the TCPA and no evidence exists of an agency relationship between the company and the authorized retailers.

    The court rejected these arguments, finding a genuine dispute of material fact as to the agency relationship based on “substantial evidence of the [the company’s] control over its dealers’ sales tactics,” including “the right to control the manner and means by which its Authorized dealers sold [the company]’s services and exercis[ed] that control.” Moreover, the court determined that the company was aware of the allegedly unlawful telemarketing calls through “dozens of complaints involving hundreds of consumers” but failed to take measures to address the problem. As for whether the company was considered a “seller” under the TCPA, the court noted that the authorized dealers worked exclusively for the company, the company had the right of first refusal to purchase the contracts sold by the dealers, the company was “totally dependent” on the dealers’ success, and the telemarketing calls were made to increase the flow of consumers to both the dealers and the company, therefore making the company a “seller” under the TCPA.

    Courts TCPA

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  • District Court finds text messages were not sent by autodialer


    On March 29, the U.S. District Court for the Northern District of Illinois granted a telecommunication company’s summary judgment motion in a putative TCPA class action involving text messages. The plaintiff asserted that the company sent him text messages asking survey questions, even though he did not consent and was registered on the Do Not Call list. The company argued that it did not use an automated dialing system (autodialer) to send the text messages to the plaintiff. The court agreed. Citing to the D.C. Circuit’s decision in ACA International v. FCC and analyzing the definition of an autodialer under the TCPA, the court concluded that the system used by the company to send the text messages was not an autodialer because it could not “generate telephone numbers randomly or sequentially.” The court also rejected the consumer’s argument that the system had “the capacity” to generate numbers randomly by selecting numbers to dial from a compiled list of accounts, noting that the TCPA “does not support a reading where ‘using a random or sequential number generator’ refers to the order numbers from a list are dialed.”

    Courts TCPA Class Action Autodialer ACA International

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