Second Circuit: TCPA Class Actions Permitted in New York Federal Courts

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A recent shift in 2nd Circuit law may lead to a rise in class actions under the Telephone Consumer Protection Act (TCPA). See Bank v. Independence Energy Grp. LLC, 736 F.3d 660 (2d Cir. 2013). After a 2012 Supreme Court case shed light on the proper interpretation of a section of the TCPA, the U.S. Court of Appeals for the 2nd Circuit took up the question on December 3, 2013 and paved the way for TCPA class actions in New York federal courts.

The TCPA is a federal statute, prompted by consumer complaints of abusive telephone practices, that prohibits certain telemarketing calls, faxes and text messages without prior consent. The statute provides a private cause of action to recipients of unauthorized messages and affords damages between $500 and $1,500 per violation. See 47 U.S.C. § 227. Because these statutory damages may become extensive when aggregated, they have frequently been the basis of class actions in other states.

Until recently, federal courts in New York have barred TCPA class actions pursuant to New York’s Civil Practice Law and Rules (CPLR) 901(b), which prohibits class actions for statutory damages. Because the TCPA had been interpreted to create a private cause of action only if otherwise allowed by state law, CPLR 901(b) had been applied to bar TCPA class actions in both state and federal courts in New York. Allowing the state to set the boundaries of statutory damage class actions significantly limited the number of class actions brought in New York.

The Supreme Court’s decision in Mims v. Arrow Fin. Servs., LLC, 132 S. Ct. 140 (2012) largely emancipated TCPA claims asserted in federal courts from state law constraints. In Mims, the Supreme Court considered whether a state statute of limitations applied to a TCPA private cause of action pending in federal court. The Court interpreted section 227(b)(3) of the TCPA, which states that “[a] person or entity may, if otherwise permitted by the laws or rules of court of a State, bring [an action] in an appropriate court of that State.” The defendant argued that section 227(b)(3) precluded federal subject matter jurisdiction over TCPA actions. The Supreme Court disagreed, noting that 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 the general federal question jurisdiction they have possessed since 1875.” Id. at 745. The Supreme Court, recognizing that Congress has a strong interest in uniform standards for TCPA actions in federal courts, held that federal courts have subject matter jurisdiction over TCPA claims.

In Bank, the 2nd Circuit applied the Supreme Court’s interpretation of TCPA section 227(b)(3) to CPLR 901(b), and reversed its previous decisions applying the bar to TCPA class actions in New York federal court. The 2nd Circuit noted that Mims triggered a fundamental shift in the way that the court views section 227(b)(3)’s “if otherwise permitted” language, and “uprooted much of our TCPA jurisprudence.” Ultimately, the 2nd Circuit found that Federal Rule of Civil Procedure 23 now governs TCPA class actions in federal courts, and New York’s CPLR 901(b) can no longer be used to bar those actions.

The effects of the 2nd Circuit’s decision have yet to be fully realized, but the implications are clear. The New York federal courts can expect to see TCPA class actions in the near future.