Third and Seventh Circuit Courts of Appeals Issue TCPA Decisions

by Sheppard Mullin Richter & Hampton LLP
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The Telephone Consumer Protection Act, 47 U.S.C. § 227, et seq. (“TCPA”), prohibits “robo-calls” to cell phones, text messages and “junk” faxes without prior consent. It imposes statutory penalties from $500 to $1,500 per violation, regardless of any actual damage, and is thus increasingly popular with the plaintiffs’ class action bar. Though passed in 1991, there are relatively few Circuit Court of Appeals decisions regarding the TCPA. In August of 2013, however, both the Third and Seventh Circuits issued TCPA decisions—one involving the revocation of prior express consent and the other involving cy pres awards in TCPA class actions.

In Gager v. Dell Financial Services, LLC, --- F.3d ----, 2013 WL 4463305 (3d Cir. Aug. 22, 2013), the plaintiff, in the course of obtaining financing from Dell to purchase a computer, provided her cell phone number on her application. (Though courts have split on the issue, the plaintiff in this case conceded this was sufficient consent to be called.) After she stopped making payments, Dell called her on her cell phone using an auto-dialer and/or a pre-recorded voice. Eventually, Gager sent a letter revoking her consent and asking that Dell stop calling her on her cell phone. Dell refused, so Gager filed a federal class action lawsuit against Dell for allegedly violating the TCPA. The district court granted Dell’s motion to dismiss on the grounds Gager could not revoke her consent under the TCPA.

On appeal, the Third Circuit reversed, holding that the TCPA allows a consumer to revoke any prior express consent previously provided. The Third Circuit also held that there is no temporal limit to this right—that is, a consumer can revoke his or her consent at any time. In addressing these issues, the Third Circuit also held that the TCPA applies equally to both telemarketing calls and debt collection calls. Plaintiffs’ class action counsel may use this tangential holding to argue that strict new rules by the FCC interpreting “prior express consent” for telemarketing calls should apply equally to debt collection calls. See Shannon Petersen, New FCC Interpretation of Express Consent to Increase TCPA Class Action Liability.

The other appellate decision comes from the Seventh Circuit, Holtzman v. Turza, --- F.3d ----, 2013 WL 4506176 (7th Cir. Aug. 26, 2013). The district court in Illinois certified a TCPA class action and entered summary judgment in favor of the class finding that the faxes in question constituted unsolicited advertisements in violation of the TCPA. The Seventh Circuit affirmed certification and judgment, but disagreed with the district court’s order that any unclaimed residual of the $4.2 million judgment against the defendant would be distributed as a cy pres award to the Legal Assistance Foundation of Metropolitan Chicago.

In so holding, Chief Judge Easterbook found that the TCPA class judgment of over $4 million did not create a “common fund.” Instead, the damages reflected divisible injury of $500 in statutory damages for each of the 8,430 unsolicited faxes negligently sent. Class actions stemming from aggregate and undifferentiated injuries create genuine common funds, where cy pres awards to charities from unclaimed remainders are appropriate. The Court questioned the appropriateness of such cy pres awards in TCPA class action judgments where each class member has a separate and readily calculable claim to the overall judgment. Nevertheless, the Seventh Circuit did not categorically reject cy pres awards in TCPA class action judgments, but remanded instead on the ground that such an award was premature in this case because no determination had yet been made of the defendant’s ability to pay any portion of the judgment or whether there would be any unclaimed remainder. The Seventh Circuit further held that the district court could not unilaterally award the residue to a charity of its choosing without input from the parties.

The issue of utilizing cy pres awards in consumer-privacy class action cases has garnered much attention lately. Last month, Sheppard Mullin partner David S. Almeida (Chicago) commented on this very issue in an article for Law 360. See Google $8.5M Privacy Deal Cracks Puzzling Injury Issues.

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