State Court Opinion in TCPA Class Action Lawsuit Takes TCPA to Task; And Includes Interesting Insurance Sub-plot

Tim Bauer

There was an interesting article published in the Cook County Record (Record) yesterday. The Record, which is owned by the U.S. Chamber Institute for Legal Reform, states: “Our goal at the Record is to cover Cook County’s legal system in a way that enables you, our readers, to make the public business your business.”

This headline caught my eye: “Appeals Panel: Fresh look needed at TCPA Class Actions vs. insurers so don’t only enrich Lawyers.”

The article highlights a May 18, 2016 opinion from a three-justice panel of the Illinois First District Appellate Court in a Telephone Consumer Protection Act (TCPA) case. The case, First Mercury Insurance Company v. Nationwide Security Services, Inc.  (Appeal from the Circuit Court of Cook County Case No. 11 CH 28513) involved a TCPA class action proceeding involving “junk” faxes.

CE Design Ltd. (CE) had claimed First Mercury Insurance Company owed it more than $4 million in insurance coverage. CE had settled an earlier lawsuit against First Mercury’s client, Nationwide Security Services Inc. In that lawsuit CE claimed Nationwide had violated the TCPA by sending unsolicited junk faxes advertising its services. The settlement agreement in the lawsuit purported to obligate the insurance company to cover the settlement costs of some $4 million even though the insurance company was not a party to the settlement and had opposed the previous settlement offer. As part of the settlement, CE was assigned the insured’s rights under the policy.

The insurance company filed a declaratory action asserting the insured, and thus the assignee, were not entitled to be indemnified under the policy. The parties filed cross-motions for summary judgment in the declaratory action, with the trial court ruling for the insurance company. On appeal, the plaintiff/assignee (CE) from the underlying class action lawsuit sought to obtain insurance coverage so as to recover the $4 million settlement amount.

The court’s opinion can be found here. It is relevant and worth reading on many fronts, but two issues stand out:

First, the court’s discussion on insurance coverage for TCPA damages is enlightening. Though no two insurance policies are identical, the issue of insurance coverage for TCPA claims is relevant for every TCPA case in the ARM industry. Though this case involves “junk faxes” as opposed to calls to a consumer’s cell phone, the issues presented are similar.

Second, the discussion of the madness involving TCPA litigation is fascinating.  The court labeled a portion of the opinion: “Policy Reasons Supporting Affirmance.”

The court wrote:

“Finally, we must express our concern with the policies implicated by the proliferation of TCPA class actions. Indeed, these cases are not about how insureds face ruinous liability for their conduct in sending unsolicited fax advertisements or compensating members of the class. Rather, they have everything to do with compensating the lawyers of the class.

This case is typical of the TCPA class action cases. Here, for example, putative class members received notice of the settlement more than five years after receiving the unsolicited fax, making the likelihood of filing a claim very low. In this appeal, which consists of a 12-volume record and 120 pages worth of briefs that raise a multitude of arguments, the only ones who stand to reap any significant benefit from a favorable outcome are the attorneys for the class.”

Finally, the authors of the article (Dana Herra and Jonathan Bilyk) had done their research. They wrote: “The lawsuit against Nationwide came as part of a litany of TCPA lawsuits brought over nearly a decade by CE Design through its attorney, Brian J. Wanca, of Rolling Meadows. According to Cook County court records and Chicago federal court records, the engineering firm and Wanca partnered on more than 90 junk fax class action lawsuits filed in Cook and Lake counties, alleging TCPA violations against a number of companies. Illinois corporation records indicate Wanca also served as CE Design’s registered corporate agent.”