Second Circuit Ruling Opens Door to Telephone Consumer Protection Act Class Actions in New York

by Proskauer Rose LLP
Contact

Litigation under the Telephone Consumer Protection Act (TCPA) has skyrocketed in recent years, with an estimated eighty percent of all cases filed in or transferred to federal court under the statute occurring in the past five years.[1] Because of the availability of statutory penalties, these cases often proceed as class actions, aggregating thousands of claims at once. A recent decision from the Second Circuit will likely increase the trend. On December 3, 2013, the United States Court of Appeals for the Second Circuit ruled that class actions under the TCPA can be brought in New York federal court, a reversal from earlier Second Circuit precedent.

Background

The Telephone Consumer Protection Act ("TCPA") was passed in 1991 to protect consumers from aggressive telemarketers.[2] Among other things, the statute prohibits the use of an auto dialer or an artificial or pre-recorded voice to make a non-emergency call without the prior express consent of the called party to a cellular phone or other similar device or service.[3] A more burdensome "prior express written consent" requirement applies if the call is a sales call, or if it consists of an artificial or pre-recorded sales message to a residential line. Under the statute, "call" includes the sending of a text message.[4]

The statute further prohibits the transmission of unsolicited advertisements to fax machines, unless there is an established relationship with the recipient, the fax number was voluntarily provided or obtained from a public source, and the fax contains a compliant opt-out notice.[5] A company who violates the Act's provisions is liable for statutory damages of $500.00[6] and up to $1,500.00 for violations found to be willful and knowing.[7]

Bank v. Independence Energy Group LLC et al.

On March 19, 2012, Todd C. Bank ("Plaintiff") filed a putative class action against defendants Independence Energy Group and Independence Energy Alliance LLC ("Defendants").[8] The complaint alleged that, in January 2012, Defendants called Plaintiff's residential telephone line using an artificial or pre-recorded line that delivered a message advertising Defendants' electricity-related services.[9] The complaint further alleged that Defendants placed at least 10,000 similar calls during the four years preceding the lawsuit.[10] The complaint sought statutory damages on behalf of all individuals to whose residential telephone lines Defendants placed one or more telephone calls in violation of the TCPA.[11] Plaintiff also sought an order enjoining Defendants from further violations.[12] Defendants moved to dismiss for failure to state a claim.

On March 12, 2013, the United States District Court for the Eastern District of New York dismissed the complaint sua sponte for lack of subject matter jurisdiction.[13] The district court relied on the decision in Foxhall Realty Corp. v. Telecommunications Premium Services, Ltd., 156 F.3d 432 (2d Cir. 1998), in which the Second Circuit held that state courts have exclusive jurisdiction over private actions under the TCPA and that, pursuant to 28 U.S.C. § 1331, federal courts lack federal question jurisdiction over such claims."[14] The district court also cited Holster III v. Gatco, Inc., 618 F.3d 214 (2d Cir. 2010), in which the Second Circuit held that § 901(b) of the New York Civil Practice Law and Rules bars TCPA class actions in federal court. Section 227(b)(3) of the TCPA creates a private right of action only "if otherwise permitted by the laws or rules of a court of a State."[15] New York state law prohibits class actions predicated on statutory damages.[16] Thus the district court ruled that Plaintiff's class action seeking statutory damages pursuant to the TCPA could not proceed.[17]

On appeal, the Second Circuit reversed and remanded.[18] The court acknowledged that most of its TPCA jurisprudence was altered by the U.S. Supreme Court's decision in Mims v. Arrow Fin. Servs. 132 S.Ct. 140 (2012), which concluded that, despite the state-centric language of §227(b)(3), there was no convincing reason to read into the TCPA's permissive grant of jurisdiction to state courts any barrier to the U.S. district courts' exercise of general federal-question jurisdiction.[19] More recently the Second Circuit's decision in Giovanniello v. ALM Media, LLC, 726 F.3d 107 (2d Cir. 2013), recognized that prior interpretation of §227(b)(3) as giving state courts the authority to set the terms of TCPA claims no longer held true.[20] Based on those precedents, the court held that Federal Rule of Civil Procedure 23, not state law, governs when a federal TCPA suit may proceed as a class action.[21] The court remanded for further proceedings.

Takeaway

The availability of New York as a forum for TCPA class action will inevitably lead to a number of complaints being filed in the state. Companies should review their telemarketing practices and procedures to ensure that they are in compliance.


[1] Zach Warren, Telephone Consumer Protection Act Attracting More Litigation, Inside Counsel, Nov. 18, 2013 available at: http://www.insidecounsel.com/2013/11/18/telephone-consumer-protection-act-attracting-more (noting that, according to a search of court records, roughly 80% of all TCPA cases filed in or transferred to federal court since the act's inception have occurred within the past five years).

[2] 47 U.S.C. §227

[3] Id. at §227(b)(1)(A)(iii).

[4] Exceptions apply.                             

[5] Id. at §227(b)(1)(C).

[6] Id. at §227(c)(5)(B).

[7] Id. at § 227(c)(5).

[8] Class Action Complaint, Bank v. Independence Energy Group LLC et al., No. 1:12-cv-01369 (E.D.N.Y. Mar. 19, 2012)

[9] Id. at ¶ 8.

[10] Id. at ¶ 10.

[11] Id. at ¶ 14.

[12] Id. at ¶15.

[13] Memorandum and Order, Bank v. Independence Energy Group LLC et al., No. 1:12-cv-01369 (E.D.N.Y. Mar. 12, 2013)

[14] Id. at 3.

[15] Id.

[16] Id. (citing NY CPLR § 901(b)).

[17] Id. at 4.

[18] Bank v. Independence Energy Group LLC et al., No. 13-1746-cv (2d Cir. Dec. 3, 2013)

[19] Id. at 3-4.

[20] Id. at 4.

[21] Id. at 5.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Proskauer Rose LLP | Attorney Advertising

Written by:

Proskauer Rose LLP
Contact
more
less

Proskauer Rose LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!