Post-Barr, Sixth Circuit Says Debt Collectors Can Be Liable

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Continuing the fallout from the now over-one-year-old decision in Barr v. American Association of Political Consultants, Inc., the U.S. Court of Appeals, Sixth Circuit ruled that the U.S. Constitution displaced the government-backed debt exception from the start, overturning the lower court and leaving government debt collectors open to liability under the automated calling restrictions of the Telephone Consumer Protection Act (TCPA) for calls made between November 2015 and July 2020.

In late 2019 and early 2020, the plaintiff/appellant, Roberta Lindenbaum, allegedly received two autodialed phone calls from the defendant/appellee, Realgy, LLC, advertising its electricity services. She sued under the TCPA, alleging violations of the automated call provisions.

After the Supreme Court decided Barr v. AAPC—striking down a 2015 amendment to the TCPA that added an exemption for government debt collection automated calls—Realgy moved to dismiss the case for lack of subject matter jurisdiction, essentially arguing that the automated call restrictions as a whole were unconstitutional from when the exemption was enacted in November 2015 through July 2020, when Barr was decided.

A district court granted the motion. In doing so, it reasoned that severability was a remedy that operated only prospectively, so the automated calling provisions were unconstitutional and therefore “void” for the period during which the exception was on the books, and therefore could not provide a basis for federal question jurisdiction. Lindenbaum appealed, and the Sixth Circuit reversed.

The judicial power is the power to decide cases through dispositive judgments, the panel explained, requiring courts to “say what the law is” and exercise “the negative power to disregard an unconstitutional amendment.”

“After disregarding unconstitutional enactments, we then determine what (if anything) the statute means in their absence—what is now called ‘severability’ analysis,” the court wrote. “But those steps are all part of explaining what the statute ‘has meant continuously since the date when it became law’ and applying that meaning to the parties before us. Courts do not change statutes.”

Instead, the Constitution itself displaces unconstitutional enactments, the court said. That means that a court conducting severability analysis is interpreting what, if anything, the statute has meant from the start in the absence of the always-impermissible provision.

“Therefore, like any judicial interpretation, a court’s severability analysis is subject to the ‘fundamental rule of ‘retrospective operation’ that has governed ‘[j]udicial decisions … for near a thousand years,’” the Sixth Circuit wrote.

Realgy’s argument that severance constituted a remedy misconstrued the nature of remedies, the court said. Remedies consist of an injunction, declaration or damages; because severance is not a remedy, it would have to be a legislative act in order to operate prospectively only.

“To sum up, the district court erred in concluding that, in AAPC, the Supreme Court offered ‘a remedy in the form of eliminating the content-based restriction’ from the TCPA,” the panel said. “Instead, the Court recognized only that the Constitution had ‘automatically displace[d]’ the government-debt-collector exception from the start, then interpreted what the statute has always meant in its absence. That legal determination applies retroactively.”

The Sixth Circuit further rejected Realgy’s backup argument that Barr should not apply retroactively because of First Amendment concerns. Government debt collectors have a due process defense to liability because they did not have fair notice of their actions’ unlawfulness, Realgy told the court, so holding private debt collectors liable would create the same content-discriminatory system that the Supreme Court held unconstitutional in Barr.

“Even assuming that it is correct, that does not create a First Amendment problem,” the Sixth Circuit said. In Barr, the robocall restriction bumped up against the First Amendment’s limits on government regulation of speech.

“Here, by contrast, the centuries-old rule that the government cannot subject someone to punishment without fair notice is not tied to speech,” the court said. “Whether a debt collector had fair notice that it faced punishment for making robocalls turns on whether it reasonably believed that the statute expressly permitted its conduct. That, in turn, will likely depend in part on whether the debt collector used robocalls to collect government debt or non-government debt. But applying the speech-neutral fair-notice defense in the speech context does not transform it into a speech restriction.”

To read the opinion in Lindenbaum v. Realgy, LLC, click here.

Why it matters: The Sixth Circuit soundly rejected the argument that the severability of the government debt collection exception applied only prospectively, creating a split with a line of TCPA defendant-friendly cases such as Creasy v. Charter Communications. Notably, only a small minority of district courts have ruled similarly to Lindenbaum and Creasy, with the majority rejecting the argument. However, not all jurisdictions have addressed this, and therefore it remains viable in the right circumstances for would-be debt collector TCPA defendants seeking dismissal.

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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