Another Fifth Circuit Court to Follow in Creasy’s Footsteps

Faegre Drinker Biddle & Reath LLP

Faegre Drinker Biddle & Reath LLP

The Eastern District of Texas recently dismissed a plaintiff’s TCPA claim in Cunningham v. Matrix Financial Services, LLC,  No. 4:29-cv-896 (E.D. Tex. Mar. 31, 2021) for lack of subject matter jurisdiction.

This decision came after the District Court rejected the magistrate judge’s recommendation that subject matter jurisdiction was proper.  The recommendation focused on the Supreme Court’s recent decision in Barr v. American Association of Political Consultants (“AAPC”), 140 S. Ct. 2335 (2020), which held that the government-debt exception violated the First Amendment.  The magistrate judge noted that, following AAPC, the majority of district courts had held that federal courts retained subject matter jurisdiction over TCPA claims brought under § 227(b)(1)(A)(iii) during the exception’s existence.  Those that did not were deemed unpersuasive given that “[t]he Supreme Court in AAPC explicitly found that the government-debt exception in the TCPA was severable from the remainder of the statute and declined to strike down the TCPA’s entire robocall ban.”  Further, the magistrate judge reasoned that “[t]he dispositive inquiry lies in . . . [footnote twelve of AAPC]”, which stated that the AAPC Court’s “decision does not negate the liability of parties who made robocalls covered by the robocall restriction.”

On review of the Magistrate Judge’s Report and Recommendation, the District Court also focused its analysis on AAPC.  It agreed with defendants’ argument that, in finding the government-debt exception unconstitutional, AAPC “invalidated the statutory provision during the exception’s operative time period, thereby stripping federal courts of subject matter jurisdiction over alleged violations of § 227(b)(1)(A)(iii) that occurred from the moment Congress enacted the government-debt exception to the Supreme Court’s invalidation of the exception in AAPC.

In reaching that conclusion, the District Court recounted the Supreme Court’s reasoning in AAPC and concluded that “the root of § 227(b)(1)(A)(iii)’s constitutional infirmity stems from the government-debt exception’s commingling with the pre-2015 version of § 227(b)(1)(A)(iii).  Therefore, fundamental legal logic dictates that whenever the government-debt exception actually interacted with the pre-2015 version of § 227(b)(1)(A)(iii), all violations of § 227(b)(1)(A)(iii) were legally flawed, as they are unable to withstand constitutional scrutiny.”  The court reasoned that footnote twelve—a focus point of the magistrate’s recommendation—is dictum that contradicts the judgment of the Supreme Court in AAPC.  Ultimately, the District Court dismissed the claims without prejudice.

This decision is only the second in the Fifth Circuit finding that a federal court lacks subject matter jurisdiction over a TCPA claim based on AAPC, the other case being Creasy v. Charter Communications, Inc., 489 F. Supp. 3d 499 (E.D. La. 2020).  The majority of district courts presented with the issue have  retained subject matter jurisdiction for TCPA cases unrelated to the government debt-exception during the exception’s existence.  The circuit split deepens as a growing number of courts tackle the issue of subject matter jurisdiction post AAPC and Creasy.  We will continue to monitor and report on these cases and their inevitable appeals.

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.

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