This week, the Ninth Circuit addresses whether text messages can violate the Telephone Consumer Protection Act’s prohibition on “prerecorded voice” messages, and it considers whether debtors who paid statutory fees under an unconstitutionally nonuniform bankruptcy provision are entitled to a refund.
TRIM v. REWARD ZONE USA LLC
The Court hold that text messages are not “prerecorded voice messages” within the meaning of the Telephone Consumer Protection Act (TCPA).
The panel: Judges N.R. Smith, Lee, and VanDyke, with Judge N.R. Smith writing the opinion.
Key highlight: “Trim fails to provide any evidence that Congress intended an idiosyncratic definition, and we presume Congress intended to legislate the primary meaning of voice, which requires an audible component.” (Citations and quotation marks omitted)
Background: Plaintiff Lucine Trim received at least three text messages with links to a promotional website from defendant Reward Zone. Trim responded by suing Reward Zone on behalf of a putative nationwide class. She alleged that Reward Zone had violated the TCPA by sending her automated messages with a “prerecorded voice.” 47 U.S.C. § 227(b)(1)(A). The district court granted Reward Zone’s motion to dismiss, concluding that the text messages could not be “prerecorded voice messages.”
Result: The Ninth Circuit affirmed, holding that “Congress clearly intended ‘voice’ in 47 U.S.C. § 227(b)(1)(A) to encompass only audible sounds.” As the Court explained, the ordinary meaning of “voice” at the time the TCPA was enacted in 1991 referred to some sort of audible sound. While the Court acknowledged that “voice” could also be used symbolically—e.g., “‘the courage which gave Voice to its creed’”—there was no reason to think that Congress had intended to adopt such idiosyncratic definitions rather than the term’s ordinary meaning. That conclusion was confirmed by a separate statutory provision referring to “a call made using a voice service or a text message sent using a text messaging service.” As the Court explained, “[i]f voice calls encompassed text messages, the inclusion of the term text message would be surplusage.” Because the statute was unambiguous, the Court saw no need to examine the legislative history. It also rejected Trim’s argument that the Court should defer to the FCC rules implementing the TCPA, holding that no deference was warranted because the statute was unambiguous, and that in any event the cited FCC regulations did not support Trim’s reading.
USA SALES, INC. v. OFFICE OF THE UNITED STATES TRUSTEE
The Court holds that debtors who paid excess statutory fees under an unconstitutional provision of the Bankruptcy Judgeship Act of 2017 are entitled to a refund.
The panel: Judges Graber, Owens, and Tunheim (D. Minn.), with Judge Owens writing the opinion.
Key highlight: “This case requires us to address the question that the Court left open: are debtors who paid these unconstitutional fees entitled to a refund? Or can the government take the money and run? As has every other court to address this issue, we hold that debtors are entitled to a refund of excess fees paid during the nonuniform period of statutory rates.” (Footnote omitted)
Background: The Office of the United States Trustee administratively manages bankruptcy proceedings in most of the country, but an older system of Bankruptcy Administrators performs that function in six districts in Alabama and North Carolina. In the Bankruptcy Judge Act of 2017, Congress increased the quarterly fees for Chapter 11 debtors that have large disbursements in United States Trustee-administered districts. Congress did not raise the quarterly fees in Bankruptcy Administrators-administered districts until 2018, and even then it did not apply the increase to debtors with pending filings. In Siegel v. Fitzgerald, 142 S. Ct. 1770 (2022), the Supreme Court held that the statutory provision raising rates only in the United States Trustee administered districts violated the uniformity requirement of the Constitution’s Bankruptcy Clause. The Court left open what the appropriate remedy should be for debtors who paid unconstitutional fees.
Plaintiff USA Sales, a California tobacco distributor, had been a Chapter 11 debtor in a United States Trustee-administered district. During the period of nonuniform fees, it had paid $595,849 more in fees than it would have paid in a Bankruptcy Administrators-administered district. USA Sales sued the United States Trustee for a refund of all excess fees paid. The district court ordered a refund for two reasons. First, it concluded that the 2017 Act did not apply because USA Sales had filed for bankruptcy before the Act took effect. Second, the court also concluded that even if the Act applied, a refund was warranted because it was unconstitutional. The United States Trustee appealed.
Result: The Ninth Circuit affirmed. As an initial matter, the Ninth Circuit disagreed with the district court that the 2017 Act did not apply to USA Sales’ bankruptcy. Although USA Sales filed for bankruptcy before the Act was enacted, the Act’s fees applied only to disbursements after the Act’s effective date. The Act was thus not retroactive, let alone impermissibly retroactive.
But the Ninth Circuit agreed that a refund was warranted because the Supreme Court had declared the Act unconstitutional. The Court noted that every court to address the remedy question had held that the government must refund the excess money it collected. The United States Trustee argued that USA Sales effectively got its remedy when, in 2020, Congress mandated equal collection of quarterly fees. But the Ninth Circuit held that Congress’s actions in 2020 were not a sufficient remedy because they were purely prospective. Nor would requiring debtors in the Bankruptcy Administrators administered districts to pay more fees be the appropriate remedy, as the Trustee contended. The Court reasoned that it had no jurisdiction to order districts in other circuits to collect fees from debtors who may have closed their cases long ago, and that doing so would violate a core tenant of the bankruptcy code—finality. The Court concluded USA Sales’ due process rights required retrospective relief.