TCPA Connect -- Nov 13, 2013

by Manatt, Phelps & Phillips, LLP

In This Issue:

Marc Roth and Becca Wahlquist Invited to Present on TCPA Developments at PACE Compliance Officers Forum

On November 13, 2013, Manatt partners Marc Roth and Becca Wahlquist will lead a presentation on recent TCPA developments and strategies for mitigating risks at the Compliance Officers Forum hosted by PACE.

Marc and Becca’s presentation will highlight what compliance officers need to know about the new FCC consent rules, discuss vicarious liability issues for companies that hire third parties to place calls on their behalf, provide an update on dialer technology developments, and share strategies for how to respond if targeted by a lawsuit.

PACE is the Professional Association for Customer Engagement, the only nonprofit organization that focuses on the advancement of companies that use multi-channel approach (such as contact centers and texts) to engage their customers.

Consent Too Varied to Certify TCPA Class, Court Rules

Hilton Worldwide Inc. scored a victory in California federal court when a judge declined to certify a class of millions of consumers in a TCPA suit.

The complaint filed by Brian Connelly alleged that subsidiary Hilton Grand Vacations made over 37 million illegal telemarketing robocalls to more than six million cell phones over a four-year period, seeking between $18 million and $54 million in statutory damages.

Connelly moved to certify the class, but Hilton objected, arguing that the proposed class failed to meet the predominance requirements under Civil Procedure Rule 23(b)(3). The hotel chain argued that potential class members voluntarily provided their contact information to Hilton in a variety of ways: reserving a guest room online, on the phone, in person, or through a travel agency, as well as signing up for the HHonors loyalty program on the phone, online, or using a paper application.

The plaintiff told the court Hilton was vastly overstating potential differences between class members and the issue of consent boiled down to a single question: Does providing a cell phone number during reservation or check-in equate to prior express consent to the telemarketing calls made by Hilton?

But given the factually different scenarios under which potential class members provided their cell phone numbers, U.S. District Court Judge Janis L. Sammartino agreed with Hilton that the issue of consent had to be dealt with on an individualized basis.

“The context of class members’ interactions with Hilton is sufficiently varied to provide dissimilar opportunities for the expression of consent,” she wrote. “For example, class members who provided a cell phone number over the telephone when making a reservation at a Hilton hotel had non-scripted, non-uniform interactions with Hilton. It is likely that each individual received a different amount of information regarding how his cell phone number would be used and there is at least a non-trivial possibility that some class members expressed consent in a manner that was colored by these circumstances.”

“This diversity suggests that the issue of consent should be evaluated individually, rather than on a classwide basis.” Hilton obtained the class members’ cell phone numbers from a variety of sources over a span of time, Judge Sammartino said, and the issue of consent presented an individualized experience.

“Thus, the individualized issues in this suit are at least as important as the common issues and the predominance requirement is not satisfied,” she concluded, denying the motion for class certification.

To read the order in Connelly v. Hilton Grand Vacations, Inc., click here.

Why it matters: The Connelly decision presents a possible line of argument for TCPA defendants facing a class certification motion. If the potential class members provided their contact information under varying circumstances, the defendant can emphasize these differences, arguing that the different scenarios require individualized inquiries into the issue of consent and making the case not appropriate for class certification.

TCPA Case Dismissed for Lack of Number Generator

A California state court decision furthers a current movement by judges in dismissing TCPA cases where the dialing device used to place allegedly violative calls does not itself have the capacity to generate telephone numbers.

Cynthia Stockwell sued Credit Management LLP alleging violations of the TCPA as well as the Fair Debt Collection Practices Act and its state equivalent, the Rosenthal Fair Debt Collection Practices Act. Stockwell claimed that the defendant “repeatedly or continuously” called her cell phone with an automatic dialing system without her permission and with the intent to harass or annoy her in an attempt to collect a debt.

Credit Management moved for summary judgment on all claims raised in plaintiff’s complaint. In a brief order issued by Orange County Superior Court Judge Ronald Bauer, the court denied defendant’s motion as to plaintiff’s claim for violation of the relevant debt collection statutes.

The court did, however, dismiss plaintiff’s TCPA claims. Stockwell alleged that Credit Management called her using prerecorded or artificial voices, or with an automatic telephone dialing system. As defined by the TCPA at 42 U.S.C. § 227(a)(1), an ATDS is “equipment which has the capacity (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.”

“Thus, the use of a number generator is required in order for [the defendant’s] calling technology to be considered an ATDS,” Judge Bauer concluded.

In support of its motion, Credit Management submitted an employee’s declaration that the company’s calling technology does not have a number generator.

“Plaintiff failed to offer any evidence in rebuttal,” the court wrote. “Thus, the uncontroverted evidence presented is that [Credit Management’s] calling technology does not have a number generator. Therefore, [Credit Management’s] calling technology does not meet the requirements of an ATDS as defined by the TCPA.”

To read the order in Stockwell v. Credit Management LLP, click here.

Why it matters: Judge Bauer’s ruling may provide a new defense strategy to the multitude of defendants facing potential liability of $1,500 per alleged violation of the TCPA. Courts have generally accepted the argument that technology qualifies as an ATDS under the Act simply because it has the capacity to automatically dial random or sequential calls – and not necessarily based on whether the machine was doing so at the time of the calls in question. Judge Bauer’s narrow reading of “capacity” under the TCPA may provide defendants with ammunition to argue that their technology does not fall within the scope of liability because a number generator was not used. This holding follows a recent decision in the Northern District of Alabama, where Judge Acker concluded that an autodialer must have the “present capacity, at the time the calls were being made, to store or produce and call numbers from a number generator.” In this case, Hunt v. 21st Mortgage Corp., Judge Acker explained, a defendant “cannot be held liable if substantial modification or alteration of the system would be required to achieve that capability.”

Calling All Cell Phones: Another TCPA Suit for Prerecorded Calls

Putative class action suits alleging violations of the TCPA continue to be filed at a fast and furious pace by plaintiffs’ attorneys, with a new suit filed in Illinois federal court that features five major insurance companies as defendants.

The plaintiffs claim that Variable Marketing LLC, a lead-generator marketing company, made prerecorded calls on behalf of the American Automobile Association, Inc., Farmers Underwriters Association, Government Employees Insurance Company, Nationwide Mutual Insurance Company, and State Farm Mutual Automobile Insurance Company.

Specifically, plaintiff Shawn Matejovich alleged he received a prerecorded message on his cell phone informing him of an opportunity to receive an automobile insurance quote. When he returned the call, he heard a prerecorded message that “State Farm, Nationwide, and Farmers are competing for your business, and you can save several hundred dollars on your car insurance.”

After being connected with a live operator, Matejovich shared personal information – his name, date of birth, address, types of vehicles owned, and driving history – and was then connected with a local State Farm agent in Ohio. Based on predetermined factors, the information provided by Matejovich and the other plaintiffs will be used by Variable to determine the selection of the specific insurer, the plaintiffs said.

According to the complaint, only one of the plaintiffs was a customer of one of the insurance companies, none of the others had preexisting business relationships with the defendants, nor had any of them provided “prior express consent” allowing Variable or any of the other defendants to call them using prerecorded messages under the TCPA. Note: This case was filed prior to the effective date of the Federal Communications Commission’s (FCC) revised rules requiring “express written consent” for telemarketing calls.

Variable acted with actual or apparent authority on behalf of the insurance company defendants, the plaintiffs said, by referencing the various companies by name and then transferring customer information directly to local insurance agents.

The suit seeks to certify a nationwide class of plaintiffs, estimated to be at least “in the thousands,” and requests an award of statutory damages of $500 per violation, trebled based on the defendant’s knowing and/or willful violations of the TCPA, as well as injunctive relief.

To read the complaint in Matejovich v. American Automobile Association, Inc., click here.

Why it matters: The wave of TCPA consumer class action suits shows no signs of abating, as plaintiffs continue to find new defendants to target for trebled statutory damages of $1,500 per violation. And, with the FCC’s new consent rules coming into effect last month, suits such as these will likely increase given the more specific and onerous consent agreement language requirements.

TCPA Plaintiff Can’t Sue Insurer

The recipient of six allegedly illegal fax advertisements does not have standing to seek a declaratory judgment ordering an insurer to pay defense costs for the sender in a TCPA suit, a Missouri federal court judge held.

According to a putative class action filed by St. Louis Heart Center Inc., Harris Medical Associates sent six fax ads in violation of the TCPA and Missouri state law.

While that case was pending, Harris turned to its insurer, Nationwide Mutual Insurance Co., for defense coverage. Nationwide agreed to defend Harris under a reservation of rights, but instead in January turned around and filed an action seeking a declaration that it had no duty to defend the underlying litigation.

Named in the declaratory action as a tort claimant of Harris’, St. Louis Heart then jumped into the fray, filing a counterclaim against Nationwide. St. Louis Heart contended that the insurance policies issued by Nationwide require the insurer to defend and indemnify Harris in the underlying litigation.

Nationwide objected, arguing that St. Louis Heart had no standing to file suit. Although Harris and St. Louis Heart are engaged in settlement negotiations, no agreement has been reached and St. Louis is a party to the declaratory action solely in its status as a tort claimant.

U.S. District Court Judge Charles A. Shaw agreed. Even assuming that St. Louis Heart had standing – a position the court adopted without deciding – it lacked standing under state law.

Judge Shaw first looked to Missouri law, as the forum state. According to the court, “Under Missouri law, a party has standing to obtain a declaration of rights, status and legal relationship under any contract only if it is a party to the contract or a third-party beneficiary thereof,” the court wrote. “It is undisputed here that St. Louis Heart is not a party to the insurance contract and has not obtained a judgment against the insured, nor does it have a written agreement with Harris and Nationwide establishing Harris’s liability. Further, St. Louis Heart has not established that it is a third-party beneficiary of the insurance contract between Nationwide and Harris. St. Louis Heart thus lacks standing to pursue its counterclaim against Nationwide under Missouri law.”

An analysis of Georgia law (which Nationwide argued governed because the policies were issued in that state and where Harris is also located) reached a similar result. Under Georgia law, “the general rule is that ‘a party who alleges he has been damaged is not entitled to bring a direct action against the liability insurer of the party who allegedly caused the damage.’ Exceptions exist where the damaged party has a judgment against the insured, liability has been otherwise fixed, or a provision in the policy or a specific statute permits such an action to be brought,” Judge Shaw wrote. “None of the exceptions to the general rule apply here, so St. Louis Heart also lacks standing to pursue its counterclaim against Nationwide under Georgia law.”

Concluding St. Louis Heart lacked standing, the court dismissed its counterclaim against Nationwide.

To read the order in Nationwide Mutual Ins. Co. v. Harris Medical Associates, LLC, click here

Why it matters: Despite pleading standing under federal law and Georgia and Missouri state law, St. Louis Heart could not find a basis for standing to bring its counterclaim. St. Louis Heart argued that it had to assert its claim for fear that it might later be barred in the underlying litigation, but the court’s opinion makes clear that the counterclaim was filed too soon. Without a judgment in the TCPA case to enforce against Nationwide or some other agreement establishing Harris’ liability, St. Louis Heart was precluded from bringing suit.

Noted and Quoted . . . Becca Wahlquist Shares Insight on Rise of TCPA Class Actions for the Daily Journal and The Hill

The Daily Journal and The Hill recently turned to Manatt partner Becca Wahlquist to discuss the impact of the FCC’s new TCPA rules on the litigation landscape.

The Daily Journal published Becca’s bylined article, titled "Informational calls could land businesses in the hot seat," on November 5. In that piece, Becca predicts a significant number of lawsuits claiming that informational calls, texts or faxes are actually a marketing tactic, and she warns companies to take seriously the new heightened consent requirements and understand the increased risk of litigants claiming that the new standard applies to “dual purpose” calls made as of October 16.

Published on November 3, The Hill article (“Lawsuits surge against robo-callers”) notes that class actions filed under the TCPA are on the rise. According to Becca, “Everyone is getting sued right now under the TCPA, and the new regulations are just going to make it worse.”

To read The Hill article, click here.

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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