In December, the Second Circuit cleared the way for plaintiffs to bring TCPA class actions in New York federal courts by holding that a New York state law prohibition on class actions for recovery of statutory damages was no obstacle to federal jurisdiction. The case, Bank v. Independence Energy Group, LLC, No. 13-1746 (2d Cir. Dec. 3, 2013), involved a fairly common TCPA fact pattern—allegations that the defendants called the plaintiff’s home phone line and delivered an advertisement using an artificial or pre-recorded voice.
But this case was filed in the Eastern District of New York. The defendants moved to dismiss, relying on a line of prior Second Circuit cases, beginning with Foxfall v. Telecomms. Premium Servs., Ltd., 156 F.3d 432 (2d Cir. 1998), holding that federal courts lacked jurisdiction to hear TCPA cases in New York because a provision of New York’s Civil Practice Law, CPLR § 901(b), prohibited class actions to recover statutory damages. Those cases turned on Section 227(b)(3) of TCPA, which provides that “a person or entity may, if otherwise permitted by the laws or rules of court of a State, bring” an action in state court for damages and injunctive relief. The Second Circuit had interpreted this provision both to (1) deprive federal courts of jurisdiction to hear TCPA cases, no matter what applicable state law provides, and to (2) prohibit a federal court from exercising jurisdiction over a TCPA class action in New York, because New York law (i.e., CPLR § 901(b)) did not otherwise permit the maintenance of a class action to recover statutory damages. The district court dismissed the action, and the plaintiffs appealed.
On appeal, the Second Circuit reversed. The court recognized that the district court relied on its prior precedents, but held that Foxfall and its progeny were “uprooted” by the Supreme Court’s decision in Mims v. Arrow Fin. Servs., LLC, 132 S. Ct. 140 (2012). The Mims court rejected the argument that Section 227(b)(3) conferred exclusive jurisdiction on state courts to hear TCPA claims, finding “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.” Bank, slip op. 3-4, quoting Mims, 132 S. Ct. at 145. As such, Banks concluded that “Federal Rule of Civil Procedure 23, not state law, governs when a federal TCPA suit may proceed as a class action.” Id. at 3. Bank also held that the second line of argument, that CPLR § 901(b) controlled federal class action jurisdiction, was foreclosed by the Supreme Court’s decision in Shady Grove Orthopedic Assocs. v. Allstate Ins. Co. The Second Circuit therefore concluded that the district courts in New York had jurisdiction to hear TCPA class actions.
As a result of this decision, companies should expect a significant number of TCPA class action filings in the Empire State in the coming new year.