TCPA Connect -- Jan 13, 2014

by Manatt, Phelps & Phillips, LLP

In This Issue:

Good Faith Belief in a Consumer’s Consent Found to be Valid Defense to TCPA Claim

Despite a material question about whether the defendant had express consent to contact the plaintiff, a California federal court judge has ruled that a good faith belief that consent existed provided a complete defense to plaintiff’s Telephone Consumer Protection Act (TCPA) suit.

Pamela Chyba filed her TCPA complaint after she received four telephone calls from collection agency First Financial Asset Management to her cell phone over a two-week period. Chyba never answered the phone and FFAM left prerecorded messages about “an important business matter.”

FFAM said the calls were made in an effort to collect a debt owed to Enterprise Rent-A-Car, which contracted with the collection agency because Chyba allegedly owed money resulting from damage to a rental car. Although FFAM produced a rental agreement between Chyba and Enterprise, she claimed she did not give her phone number to Enterprise and could not recall if she rented a car.

In addition to TCPA claims, Chyba alleged the defendant violated the Fair Debt Collection Practices Act and its California equivalent. Finding that the alleged calls failed to meet the requirement “to annoy, abuse, or harass” the recipient, U.S. District Court Judge Roger T. Benitez granted FFAM summary judgment on most of the FDCPA and state law claims.

Turning to the TCPA, the parties agreed that an automatic dialing system was used and that the calls were made to a cell phone. One issue remained for the court: whether Chyba gave prior consent to be called. There would not be liability if Chyba gave her consent, which for debt collection calls could mean that she provided her telephone number to Enterprise.

Despite the production of a rental agreement between Chyba and Enterprise, the court said a material question remained because Chyba disputed that she ever gave consent, denied giving Enterprise her phone number, and stated that she “cannot recall” whether or not she rented a car. Therefore, Judge Benitez noted, a reasonable fact finder could determine that Chyba “never gave express consent because she never gave her phone number to Enterprise.”

FFAM’s affirmative good faith defense argument proved to be a winner, however. The debt collection agency argued it had a good faith belief that Chyba had given Enterprise her consent. “[T]he documents provided gave [FFAM] a good-faith basis to believe that it had consent to contact [Chyba] at that number. The court also notes that not only was the cell number listed as her ‘home’ number, a different number had been listed in the box for a cell phone number. There appears to have been little that [FFAM] could have done to further ascertain whether there was consent, except to call [Chyba] at her home number,” the court said.

“Thus, although [Chyba] did not give consent directly to [FFAM] to call her cell phone number, it is sufficient that [FFAM] had a good-faith basis to believe that [Chyba] had provided consent to the creditor on whose behalf [FFAM] sought to collect a debt,” Judge Benitez concluded. “Even if [Chyba] is correct in stating that she never gave [FFAM] or Enterprise consent to call, and there was no actual prior consent from [her], [FFAM] is not liable for acting in good faith upon the information provided to it.”

To read the decision in Chyba v. First Financial Asset Management, click here.

Why it matters: A victory for TCPA defendants, the Chyba decision illustrates that a good faith defense can provide a complete defense to a TCPA claim. The Southern District of California court’s decision that there would not be strict liability under the TCPA when a company believed it had the right consent to make autodial calls to a consumer’s cell phone provides a stark contrast to decisions issuing out of the Seventh Circuit. Moreover, this decision should encourage defendants who believe they have a good faith defense to ensure that such a defense is asserted and developed early in the litigation, as here it provided grounds for summary judgment.

7th Circuit: TCPA Doesn’t Preempt More Restrictive State Robocall Law

The TCPA does not preempt an Indiana law banning all robocalls made without consent, including calls made by not-for-profit groups, the 7th U.S. Circuit Court of Appeals has ruled.

Indiana enacted the Automated Dialing Machine Statute, a law banning all calls made by automated dialing machines absent consent by a recipient prior to the call being received. Non-profit group Patriotic Veterans Inc. filed suit to challenge the law, arguing that it violates the First Amendment and was preempted by the federal TCPA (which contains an exception for noncommercial calls by charities and political groups).

The political advocacy group argued that an automated dialing machine is necessary to inform voters about the positions of politicians on issues relevant to veterans because live operators are too expensive and too slow.

A federal district court agreed with Patriotic Veterans that the TCPA preempted the state law, but the 7th Circuit reversed its finding, ruling that the language of the statute expressly allows states to enact more restrictive legislation on autodialers.

Specifically, the 7th Circuit found that the TCPA’s preemption clause (also called the savings clause), 47 U.S.C. § 227(f)(1), states that “nothing in this section or in the regulations prescribed under this section shall preempt any State law that imposes more restrictive intrastate requirements or regulations on, or which prohibits . . . (B) the use of automatic telephone dialing systems; (C) the use of artificial or prerecorded voice messages.”

Although the 7th Circuit’s reading – that state laws may impose more restrictive laws on automatic dialing systems or a total prohibition of both intrastate and interstate automatic dialing systems – may lead to an “odd result,” the “plain language of the statute decrees that state laws that prohibit autodialers are not preempted by the statute,” the court wrote.

“Given the myriad variations possible in state regulations of autodialers which might or might not coincide with those promulgated by the federal government, Congress may have determined that states could pass regulations with flat-out prohibitions but not regulations with more restrictive interstate constraints. An absolute prohibition makes the rules on the use of autodialers easy to follow on a state-by-state basis (and, one might argue, so do black-and-white rules requiring consent), but asking autodialing companies to comply with a web of fifty different state regulatory systems with different requirements about the permissible hours and types of call recipients might create havoc.”

Although there was no express preemption, the three-judge panel also considered whether the TCPA impliedly preempted the Indiana statute and found that it did not. Conflict preemption did not exist because Patriotic Veterans had not shown that it was impossible to comply with both the state and federal laws and the state law did not impede congressional objectives. “The veterans group could comply with the Indiana requirements for consent without violating any aspects of the TCPA,” the court said. “Conflict preemption requires complete impossibility – not mere inconvenience or hardship.”

The court found Patriotic Veterans’ field preemption argument similarly unavailing. The Indiana statute could have been preempted if the TCPA protected a federal regulatory scheme that was so pervasive and a federal interest so dominant that it could be inferred that Congress intended to occupy the entire legislative field. However, “The non-preemption clause of the TCPA is the first and best evidence that the federal government did not intend to occupy the entire field of robocalls regulation,” the court noted. States “historically have held the power to police harassing telephone calls,” as well as “activities that violate the peaceful enjoyment of the home,” and the “TCPA also expressly contemplates that states will continue to regulate telemarketing.”

The 7th Circuit also noted that courts in other states have reached the same conclusion when evaluating whether the TCPA preempts state laws, citing decisions from the 8th Circuit, a New York federal court, and courts in North Dakota and Utah.

Because the district court decided the case on preemption grounds, it never addressed Patriotic Veterans’ alternative argument – that Indiana’s law violates the First Amendment. Thus the 7th Circuit found that issue should first be considered by the district court, and remanded the case for consideration of the issue.

To read the decision in Patriotic Veterans v. State of Indiana, click here.

Why it matters: The 7th Circuit resoundingly concluded that the TCPA does not preempt the more restrictive Indiana autodialing statute. The court emphasized that even if the phrasing of the TCPA’s savings clause yielded an “odd result,” the “court’s job is not to fix it,” cautioning that courts should examine the text of a statute – not psychoanalyze those who enacted it. Thus, companies making autodialed calls must not look just to the TCPA, but to state laws as well, to ensure compliance with all applicable laws.

2nd Circuit Rules TCPA Actions Viable in New York Federal Court

In the latest chapter of a high-profile TCPA suit, the Second U.S. Circuit Court of Appeals has opened the door once closed to federal TCPA class actions in the state of New York.

New York’s state law does not permit such class actions, and federal courts several years ago had held that New York’s federal courts were similarly unavailable for a TCPA class action. The federal appellate panel’s opinion reverses two recent decisions from a federal court judge holding TCPA class actions seeking statutory damages were not permitted under state law.

New Yorker Todd Bank filed a putative class action under the TCPA on behalf of an estimated 10,000 recipients of robocalls from Independence Energy Group. In March U.S. District Court Judge William F. Kuntz II dismissed the action for lack of subject matter jurisdiction, relying on New York Civil Practice Law and Rules § 901(b), which prohibits class action suits for statutory damages.

Bank filed a motion to reconsider in light of last year’s U.S. Supreme Court decision in Mims v. Arrow Financial Services, where the justices held that state and federal courts have concurrent jurisdiction over TCPA claims and plaintiffs can therefore file in either venue. Judge Kuntz affirmed his earlier ruling and Bank appealed to the 2nd Circuit.

Opening the door to TCPA class actions in New York federal court, the federal appellate panel reversed.

Noting that Mims “uprooted much of our TCPA jurisprudence,” the unanimous three-judge panel said that despite the “state-centric” language of the federal TCPA, the Supreme Court’s decision suggests that Congress “merely enabled states to decide whether and how to spend their resources on TCPA enforcement” and emphasizes the “strong federal interest in uniform standards for TCPA claims in federal court.”

In the wake of Mims, the 2nd Circuit said it had already issued a decision holding that federal law provides the governing statute of limitations in a TCPA claim, not the state limitations period. “Nothing about the law at issue here – a state civil procedure statute prohibiting class-action claims for statutory damages – counsels a different result,” the court concluded. “Accordingly, we hold that Federal Rule of Civil Procedure 23, not state law, governs when a federal TCPA suit may proceed as a class action.”

To read the decision in Bank v. Independence Energy Group LLC, click here.

Why it matters: The 2nd Circuit’s decision opened the courthouse doors even wider for TCPA class action plaintiffs and allows New York residents to bring classwide TCPA suits in federal court pursuant to FRCP 23.

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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