PISCATAWAY, N.J. — First Credit Services (FCS), an established leader in the Accounts Receivables Management industry recently acquired American Healthcare Outsourcing Alternatives (AHOA), based in Midland, GA. This important acquisition bolsters the already thriving healthcare sector within the current FCS operation.

Raj Chhabria, CEO of First Credit Services, said, “This transaction fits in perfectly with our business strengths as both organizations have a long track record as innovators by going the extra mile when it comes to outstanding patient service and compliance.  Our growth plans within the healthcare market are a major focus of our growing business, and this acquisition is coming at the perfect time as we continue to establish a new trend in how collection agencies treat patients. We take a lot of pride in how we operate, and we have always been big fans of AHOA and how they have also made a positive impact on the healthcare community.”

AHOA focuses exclusively on healthcare with core strengths that include First Party Self-Pay, Insurance Follow-up and Bad Debt Collections. AHOA is located close to Fort Benning in Columbus GA, and has successfully built their entire operation around the core value of giving back to United States veterans by providing good paying jobs to the military and their immediate families.  This mission has proven to be a very successful business model and First Credit Services will continue to support and grow the operation and offer even more jobs to our valued and appreciated American Service men and women. Fred Landrum, (a Vietnam-era veteran and former CEO of AHOA) will stay on with FCS as Vice President of Healthcare Services to help support existing and future FCS/AHOA Customers. 

Integrating the AHOA operations into the FCS system is already under way, and all AHOA customers are being welcomed into the First Credit Services community. Raj goes on to say, “We could not be more excited about this great partnership with AHOA, and welcome all of the great AHOA employees and customers with open arms.” 

About First Credit Services, Inc.

Established in 1993, and headquartered in Piscataway, NJ, First Credit Services (FCS) is a collection industry leader within several vertical markets including Healthcare, Health & Fitness, Auto Financial Services, Government, and more. Licensed across the Country, FCS offers fully compliant Accounts Receivable Management Services covering the entire Revenue Cycle.  All programs offered at FCS are geared toward fantastic customer service and industry leading results. To learn more about First Credit Services, please go to www.fcsbpo.com or contact us at Sales@fcsbpo.com.

Last week a federal judge in New Jersey addressed the thorny issue of whether a consumer’s “revocation of consent” met the FCC’s definition of “a reasonable method” of revocation of consent under the TCPA.  The case is Martinez v. TD Bank USA, N.A., and Target Corporation (Case No 15-7712, U.S. District Court, New Jersey.)

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A copy of the opinion can be found here. (Editor’s Note: The court’s full opinion discusses a number of issues. This article is only addressing the TCPA revocation of consent issue.) 

In their 2015 order, the FCC stated that “consumers have a right to revoke consent, using any reasonable method including orally or in writing.” Per the FCC, in order for a called party to revoke his or her consent, “the TCPA requires only that the called party clearly express his or her desire not to receive further calls.” (In re Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991.) In this case, the Honorable Jerome B. Simandle was presented a set of facts that required him to determine whether, as a matter of law, an attempt to revoke consent was, in fact, a reasonable method.

Background

TD Bank is a large national bank chain that (among other activities) “owns and underwrites a portfolio of credit card accounts.” The Target credit card portfolio was purchased by TD Bank in March of 2013.  Target is a corporation headquartered in Minnesota and doing business in New Jersey and nationwide, and remained the servicer of the credit card portfolio purchased by TD Bank.

Plaintiff Charlene Martinez, opened a Target credit card account in 2007. When Plaintiff opened the account, she agreed that Target or its agents were permitted to call her, including her mobile telephone, regarding her account, and that they could make such calls using an automated dialing/announcing device. 

Plaintiff obtained the cell phone number at issue, ending in -2420, in 2011. When she updated her account information with Target on its website on September 17, 2012, she provided this number as her “home” telephone number and received a disclosure that stated that, by providing her phone number on that page, she consented to receiving, at that phone number, autodialed and prerecorded calls from Target or on Target’s behalf. Plaintiff then clicked “Submit” after that disclosure was provided.

The record also showed that throughout the relationship, plaintiff had numerous contacts with Target through their web site, though Target’s automated phone system and on the phone with live customer service agents.

Plaintiff’s Target credit card account became delinquent sometime in late 2014.  Between August 29, 2014 and April 15, 2015, Target placed 165 calls to Plaintiff’s cell phone regarding the delinquent account.

Plaintiff alleges that on April 10, 2015, plaintiff’s bankruptcy attorney, Daniel Shay, faxed cease-and-desist letters to two fax numbers, “revoke[ing] any prior express consent that may have been given [by Plaintiff or her husband] to receive telephone calls, especially to Clients’ cellular telephones, from an Automated Telephone Dialing System, or a pre-recorded voice” as outlined in the TCPA.” The letters were faxed to two numbers: (856) 533-1138 and (302) 683-6889. The transmission report for the faxes indicated that the transmission for each was “OK.” 

This is where the case gets interesting.  

Defendants claim they “have no record of receiving the cease and desist letters.” 

The (856) 533-1138 number receives faxes for TD Bank, N.A.’s Business Solutions group. That TD entity “is a different entity” than the one related to the Target credit card portfolio. 

The (302) 683-6889 number receives faxes for TD Bank USA, N.A. as well as for TD Bank, N.A.; however, Defendants note that “the number was not provided as a method to communicate regarding the Target REDcard.” 

Target placed four calls to the -2420 number from April 11, 2015 to April 15, 2015. Target stopped calling Plaintiff after April 15, 2015, when a Target representative reported in Target’s account system that Plaintiff had retained a bankruptcy attorney.

The Issues

Defendants argued that they are entitled to summary judgment on Plaintiff’s claim that they violated the TCPA because there is no genuine dispute of material fact that Plaintiff provided her prior express consent to receiving autodialed calls to her cell phone, and she did not receive any calls from Defendants after learning of her representation by an attorney. 

Plaintiff conceded that she provided consent for Defendants to call her using an autodialer on September 17, 2012. However, she argued that there is a genuine dispute of material fact as to whether Defendants continued to call her after she revoked that consent: she contends that she has submitted sufficient evidence for a reasonable finder of fact to conclude that she revoked her consent to be called on April 10, 2015 via the cease-and-desist letters faxed by her bankruptcy attorney. 

As noted above, plaintiff received four calls from April 11, 2015 to April 15, 2015. It is those 4 calls that became the crux of the plaintiff’s TCPA claim. 

The Court’s Opinion

Judge Simandle reviewed and discussed the FCC’s 2015 order and several TCPA cases involving revocation of consent. Judge Simandle then condensed the TCPA issue to the following: 

“The parties appear to agree that the substance of the cease-and-desist letters, faxed by Plaintiff’s bankruptcy attorney on April 10, 2015, would have sufficed to give Defendants reason to know that Plaintiff was withdrawing her consent to be called. The sole dispute is as to whether the faxing of the letters to the fax numbers in question, where Defendants submit that the evidence is clear that they never received either letter, was a reasonable method of informing Defendants that Plaintiff was revoking her consent.” (Emphasis added by insideARM.) 

Simandle summarized the defendants’ position: 

“The crux of Defendants’ argument that the faxing of the cease-and-desist letters to the two numbers on April 10 was not a reasonable method of revoking Plaintiff’s consent is that, in the first instance, Target was the servicer of Plaintiff’s credit card account and Target was not one of the parties faxed, and second, neither number that was faxed was one that was provided for consumers to use to communicate about their Target credit card accounts. 

Furthermore, Defendants argue that they cannot be said to have had reason to know that Plaintiff revoked her consent on April 10, 2015 when they assert that they never received the revocation, their business records do not reveal having received the faxes, and Plaintiff cannot point to any evidence that they received the faxes beyond the numbers themselves and the fact that the faxes marked their transmission as “OK.”

Judge Simandle then determined: 

“The Court finds that Plaintiff has not produced sufficient evidence to allow a reasonable finder of fact to conclude that she revoked her consent on April 10, 2015, thus allowing her claim under the TCPA for the four calls placed from April 11, 2015 to April 15, 2015 to go forward. A reasonable finder of fact could not conclude that faxing a letter to a fax number only known to be associated with one party that is simply connected to the credit card account at issue, and has never serviced that account, cannot constitute a reasonable method of revoking consent to be contacted regarding that account. 

For those reasons, the Court finds that Plaintiff has not put forth sufficient evidence to allow a reasonable finder of fact to conclude that she used a reasonable method to communicate to Defendants, on April 10, 2015, revocation of her consent to be called. Given that, her conceded prior express consent was still in effect, and Plaintiff cannot prevail on her claim that the four calls from April 11, 2015 to April 15, 2015, constituted violations of the TCPA. Accordingly, the Court will grant summary judgment to Defendants as to the TCPA claim.” 

insideARM Perspective 

As noted above, this case involved other issues that we did not address in this article. However, the issue of whether a party used a “reasonable method” of revoking prior consent is going to continue to be a hot topic in TCPA litigation. In this case, under the facts presented, a federal judge in New jersey determined that there was no valid revocation of consent.  But, the issue remains very cloudy and fact specific. 

The irony here is that over the past two years TCPA experts have often used Target or Walmart as an example when discussing revocation of consent. The extreme example often used is: If a person with a Target credit card walked into a local Target store, made purchases, and just as the person was leaving the checkout line said to the cashier, “By the way, I am hereby revoking my consent to be called on my cell phone regarding my Target account” …is that a valid revocation of consent? 

This case provides some guidance, but the issue remains blurry and fact specific.

The Oregon Attorney General announced yesterday that the Senate had passed House Bill 2356, clearing the way for the legislation to go to the Governor for her signature.

HB 2356 would ensure that lawsuits filed against Oregonians by debt buyers (or debt collectors on behalf of debt buyers) are accurate and include this information:

• The original creditor’s name
• A way to contact the new debt buyer
• The last four digits of the original creditor’s account
• The date and amount of the last payment
• An itemized list of charges and fees imposed

Under the bill, consumers may also ask the debt collector for documents to prove that they owe the debt.  The debt collector then must stop collection until they produce the documents within 30 days. This bill would also make it a violation to file a lawsuit knowing that the debt is past the statute of limitations.

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According to the annoucement, the bill was the product of work by the Oregon Department of Justice, Representative Paul Holvey, the Oregon Law Center, the Debt Collector’s Association, Encore, the Oregon Judicial Department, and the Oregon Department of Consumer and Business Services.

insideARM Perspective

In case you missed it, several states have passed new debt collection and/or debt buying laws this year. Here are some of the others:

Colorado’s Fair Debt Collections Act Continues After Sunset Review

Colorado puts all its laws through a regular “sunset” review, to make sure the law is still necessary and fulfilling the needs of Colorado voters/consumers. The points we outlined in an April story remain true for Colorado’s Fair Debt Collection Practices Act. Colorado’s FDCPA is up for another sunset review in 2028.

West Virginia Amends its Consumer and Credit Protection Act

West Virginia has also made some changes to its Consumer and Credit Protection act — specifically:

• excluding attorneys from the definition of “debt collector” under certain circumstances
• changing the time period where direct contact with a consumer must cease after receipt of notice of representation from seventy-two hours to three business days
• establishing means of notice to a debt collector of a consumer’s representation by legal counsel
• requiring notice of representation to a debt collector be sent by certified mail, return receipt requested

SAN FRANCISCO, Calif. – LiveVox Inc., a leading provider of cloud channel of choice communications solutions, today unveiled new branding and visual identity reflecting the company’s innovative approach to helping contact centers effectively expand their communications strategies beyond voice. The new visual identity includes an updated logo and a redesigned website incorporating the new branding.

“We are excited to unveil our new brand that exemplifies the LiveVox story,” said CEO Louis Summe.  “The design and visual identity represent the evolution of not only our company, but our proven expertise in developing innovative cloud solutions. In combination with our deep understanding of compliance challenges, LiveVox is helping contact centers drive consumer engagement performance while addressing the demands of a multichannel environment in highly regulated industries.” 

This new brand identity – featuring a data-rich, mobile-friendly website and new logo – builds on other recent momentum at LiveVox, including: 

• Key client wins expanding LiveVox adoption in the healthcare, financial, telecom and teleservices industries

• Adding new intelligent multichannel capabilities to support the cross-channel campaign needs of their clients

• Enhancing their performance analytics capabilities to provide actionable insight that drives ROI and support operational business efficiency 

The site includes service offering information to help contact centers better understand the complete range of LiveVox solutions for driving engagement strategies on the consumer’s channel of choice. Service descriptions, videos, brochures, and client success stories work together to provide a detailed overview of LiveVox’s capabilities across a wide range of sectors, including financial services, healthcare, telecom, and teleservices.  Created with the user experience firmly in mind, the website is compatible with today’s browsers and mobile devices.  

For more information on the brand relaunch and a glimpse at the new look, visit www.livevox.com. 

About LiveVox, Inc.
LiveVox is a leading provider of enterprise cloud contact center solutions, managing more than 6 billion interactions a year across a multichannel environment. With over 15 years of pure cloud expertise, we empower contact center leaders to drive effective engagement strategies on the consumer’s channel of choice. Our leading-edge risk mitigation and security capabilities help clients quickly adapt to a changing business environment. With new features released quarterly, LiveVox remains at the forefront of cloud contact center innovation. Supported by over 450 employees and rapidly growing, we are headquartered in San Francisco with offices in Atlanta, Bangalore, and Colombia. To learn more, visit LiveVox.com or email us at Info@LiveVox.com

On Monday the Third Circuit Court of Appeals affirmed a lower court decision granting a plaintiff summary judgment on a Telephone Consumer Protection Act (TCPA) claim and reversed a trial decision in favor of the defendant on a Fair Debt Collection Practices Act (FDCPA) claim. The case is Daubert v. NRA Group, LLC, d/b/a National Recovery Agency (Case Nos. 16-3613 and 16-3629, U.S. Court of Appeals, Third Circuit).

A copy of the opinion can be found here.

The introductory paragraph in the opinion succinctly summarizes the case and the decision: 

“This case — involving tens of thousands of dollars in statutory damages, half a jury trial, and cross-appeals — stems from a debt collector’s pursuit of $25 in unpaid medical bills. John Daubert won summary judgment on his TCPA claim against NRA but he lost at trial on his FDCPA claim. NRA appeals. Daubert cross-appeals. We’ll affirm on the TCPA claim but reverse and remand on the FDCPA claim.” 

Background

Plaintiff, John Daubert went to Wilkes-Barre General Hospital for treatment. The Hospital’s radiology department, operated by Radiology Associates of Wyoming Valley, x-rayed him. His bill was $46. Radiology Associates forwarded his medical report and cellphone number to the company that billed its patients, Medical Billing Management Services, or MBMS. Daubert’s health-insurer contributed $21, so Daubert was responsible for the remaining $25. He apparently didn’t pay (it’s unclear why). MBMS transferred his account to a debt collector, NRA, and passed along Daubert’s cell number.

NRA attempted to collect the $25 that Daubert owed Radiology Associates in two ways. First, it sent him a collection letter. Visible through glassine windows on the envelope were — Daubert alleged — the bare sequence of letters and numbers NRA used to keep track of Daubert’s collection account in its system and — undisputedly — a barcode that, when scanned by the appropriate reader, revealed that account number.

Second, NRA called Daubert sixty-nine times in ten months. He answered just once. Each call was made using a Mercury Predictive Dialer.

Daubert sued NRA. He alleged violations of the FDCPA. Daubert claimed the bare account number and barcode on the collection letter’s envelope could have revealed his private information. NRA filed an answer to the complaint claiming a “bona fide error” defense.

Daubert subsequently amended his complaint to include a TCPA claim based on the 69 calls to his cell phone. NRA’s answer to the complaint alleged “prior express consent” for the calls.

During Discovery plaintiff served NRA with a Notice of Deposition under Federal Rule of Civil Procedure 30(b)(6) asking NRA to pick a witness to testify on behalf of things germane to both claims. NRA designated their Director of Payment Processing as their witness. The witness testified how NRA employees generate calling campaigns and how the dialer operates. From the deposition transcript:

1. Is a human being involved in the placement of any phone calls made on the dialer, with the exception of creating a campaign?
2. I — I don’t know. I don’t think there’s any other way to — no. The dialer does the dialing.
3. Okay. So a human being selects the campaign criteria but then the dialer actually places the phone call?

When discovery closed, Plaintiff moved for summary judgment on both claims. He cited the testimony above and his own affidavit that he “never provided” Radiology Associates with his cell number or gave them permission to call his cell number.

In opposing the motion NRA submitted an affidavit from a different employee it didn’t produce during discovery. This affidavit contradicted the testimony of the Director of Payment Processing. This affidavit said that the Mercury Dialer couldn’t make a call without “human intervention” and that a person “must hit the “F4” key on a keyboard to launch a call. The affidavit further stated that without hitting the “F4” key, the dialer cannot make a call.” 

The court granted the summary judgment motion on the TCPA claim. The court relied on the “sham-affidavit doctrine” and declined to consider the affidavit that was submitted by NRA that contradicted the deposition testimony. However, the court denied the summary judgment motion on the FDCPA claim and a jury trial was scheduled to resolve the FDCPA claim. At trial NRA moved for judgment as a matter of law on the FDCPA claim. The court granted that motion holding that no reasonable jury could find that the alleged FDCPA violation could not have occurred from anything other than a bona fide error. The two appeals followed.

The Court of Appeals Opinion 

The TCPA Claim 

First, the Court of Appeals discussed the issue pf prior express consent. The court recognized other cases involving medical bills, referencing Baisden, et al. v. Credit Adjustments, Inc. and Mais v. Gulf Coast Collection Bureau (see insideARM article about Baisden case here and on Mais here). 

In both of those cases the courts had ruled that the consent to call a cell phone was given when admissions documents were filled out and those documents provided notice that the information could be used by others in the hospital that provided medical care. However, the court distinguished the facts in this case from the facts in Baisden and Mais, saying: 

“No evidence of such prior express consent exists in the record. NRA managed to show only that Daubert maybe provided his cell number to the Hospital, an intermediary associated with Radiology Associates. By pointing that out, we hold, Daubert carried his burden as the movant to show the absence of a genuine, material factual dispute on NRA’s prior express consent defense.” 

The court then moved to the issue of whether the district court acted correctly in disregarding the affidavit that contradicted the deposition testimony.  The Court of Appeals determined that the district court “acted well within its discretion” to disregard the affidavit. The court said that NRA failed to “provide a satisfactory explanation for the discrepancy.” 

The FDCPA Claim 

The court then turned to Daubert’s appeal of the district court’s decision to grant NRA judgment as a matter of law on the FDCPA claim. Here the court barely discussed the long line of “envelope” cases (for a quick summary of those cases, see the insideARM FDCPA caselaw chart). Instead, the court focused on the applicability of the “bona fide error defense” to this case.

The court wrote:

“The bona fide error defense says a debt collector can escape liability under the FDCPA by proving that its statutory violation was “not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.  But the defense doesn’t apply if the violation resulted “from a debt collector’s mistaken interpretation of the legal requirements of the FDCPA. In other words, a mistake of law isn’t a bona fide error. 

Where an issue of law under the FDCPA is unsettled by the Supreme Court or a precedential decision of the relevant court of appeals, debt collectors can’t escape a district court’s finding of FDCPA liability under the bona fide error defense by pointing to the persuasive authority they relied on at the time to justify their conduct.”

insideARM Perspective 

This case provides a lot of things for ARM companies to consider.

First, the risk/reward of time and effort expended on a small balance accounts. 69 phone calls for a $25 claim?

Second, the choice of who to participate in a deposition under Federal Rule 30(b)(6).  Under that rule a corporate defendant can choose who to serve as the corporate representative.  See this article written by David L. Johnson and Kyle Young of the Miller & Martin PLLC law firm published in the American Bar. In that article the authors note: 

“At first blush, selecting an individual to serve as a corporate representative in a lawsuit may seem like a mundane task. Selecting the wrong individual, however, can prove disastrous.” 

The issue of whether a dialer is or is not an Automated Telephone Dialing System (ATDS) is very complicated. How should the system be described? How should human intervention be explained? Selection of a witness to discuss a system’s TCPA compliance should be carefully considered. 

Finally, as can be seen from a review of the insideARM FDCPA caselaw chart, decisions in the “envelope cases” are not consistent. The most conservative approach is probably the best approach to avoiding FDCPA litigation on what can be seen on an envelope, or through the glassine window.  

TORONTO, Canada — Gatestone & Co. Inc. (Gatestone), announces in a joint press release with Alorica that it has acquired all of the outstanding shares of NCO Financial Services, Inc. (NCO), 1st and 3rd Party collection business operating in Canada. Gatestone also acquired certain segments of Third-Party non-healthcare operations of Global Receivables Solutions, Inc. (GRSI) handled in Omaha, NE and Fredericksburg, VA. This transaction represents a unique and significant opportunity to enhance Gatestone’s growth and advance the Company’s strategic focus on growing its core business worldwide.

Gatestone, a global leader in the Accounts Receivable Management, Customer Service and BPO markets, has been operating since 1978. This acquisition is a positive, strategic fit which further strengthens Gatestone’s business model and adds significant scale to our operations and service offerings. Gatestone will be adding all of the GRS employees to its U.S. employee base from their existing sites and we look forward to welcoming the NCO employees who are making the transition to Gatestone.

NCO, originally established in 1927, was an Accounts Receivable Management leader and pioneer, and their business model was the benchmark used by many credit executives in the industry. NCO’s tenured and experienced leadership team and staff was led by Pat Di Franco who holds over 25 years experience in the industry. Mr. Di Franco has joined Gatestone and will continue to manage and be responsible for the acquired Canadian operations.

Nicholas Wilson, Chairman and CEO of Gatestone stated, “This is a tremendous opportunity for Gatestone as we pursue new global opportunities to grow our business, while improving the profitability of our existing clientele. The core values that are synonymous to our company and its brand shape the way we run our business and these values will continue to guide us as we look to the future.”

Contact:
Barry Kryba, Executive Vice President
800-900-4238 ext. 2973

GENESEO, N.Y. – Coast Professional, Inc. (Coast) is pleased to announce the promotion of Ms. Amber Baker to Vice President of Operations. This promotion recognizes Ms. Baker’s successful eight year career at Coast, as well as her value as a leader to the organization. In her prior capacity, Ms. Baker was responsible for a group of six Directors and hundreds of consumer care managers and representatives. 

As Vice President of Operations, Ms. Baker will be responsible for managing one of Coast’s major Federal contracts and will have the opportunity to hone her leadership and problem solving skills while continuing to assist in employee development. Ms. Baker is a highly motivated leader who will be managing all aspects of Coast’s Federal contract, including team performance, setting collection targets, and identifying areas for process improvement. She possesses a particular expertise in new startup operations, from initial planning through all states of implementation.

Ms. Baker has 8 years of experience in the collection industry. She began with Coast in 2009, working in the Human Resources Department as a Receptionist. Over the course of the eight years that followed, she worked as a Collection Representative, Quality Control Manager, West Coast Manager, Senior Collection Manager, Director of Operations, to her most recent role of Senior Director of Operations. Ms. Baker holds her Credit & Collection Compliance Officer (CCCO) Designation from The Association of Credit and Collection Professionals (ACA International).

Everett Stagg, CFO and Co-Chairman of the Board of Directors commented, “Since starting at Coast, Amber has demonstrated consistent growth culminating into the exceptional leader she is today; she brings tremendous value to the organization and we are excited to see her excel in her new role. She will ensure our top performance while maintaining compliance with all consumer care requirements.”

“Amber’s efforts to lead our team to compliance and operational success has been evident throughout her career with Coast. She has demonstrated consistent leadership aptitude and poise through her interactions with staff. We are pleased to share this news of her promotion to Vice President of Operations,” remarked CEO and Co-Chairman of the Board, Brian Davis.

Roxanne Baker, President, also noted, “Over the past eight years with the company, Amber has worked diligently to earn her promotion to Vice President of Operations. She displays exceptional management ability on a daily basis and has made company success a hallmark in her career. Amber’s focus has always been the advancement of her team and application of company values throughout the organization. Congratulations Amber on the well-deserved promotion.”

About Coast Professional, Inc.

Coast Professional, Inc. is an accounts receivable management company, dedicated to the respectful and ethical collection of higher education and government debt. Coast provides professional collection services to over 200 campus based colleges and universities, guaranty agencies, and government clients. Coast is a five time honoree on the Inc. 5000 list for American’s Fastest-Growing Private Companies provided by Inc. Magazine and in 2016, was recognized for the third consecutive year as one of the “Best Places to Work In Collections” by insideARM.com and Best Companies Group. Since 1976, Coast has worked closely with clients to increase recoveries by assisting consumers in resolving their financial obligations. Coast’s success is exemplified by exceptional recoveries, superior service, and dedication to the highest levels of compliance. (www.coastprofessional.com)

Earlier this month insideARM published Part One of this 2-part series on class action litigation. 

This article, Part Two, discusses the proposed revisions to Federal Rule of Civil Procedure 23 and the impact these changes may have on future class action settlements.  

The Proposed Amendments to Federal Rule Of Civil Procedure 23

In 2016, the Judicial Conference Advisory Committee proposed changes to Federal Rule of Civil Procedure 23 (the “Proposed Amendments”).[i]  The Proposed Amendments focus largely on the sections of Rule 23 governing class action settlements.   Specifically, the Proposed Amendments modify the class settlement process in the following ways:

1. Requires the frontloading of class settlement information – The Proposed Amendments authorize class notice only after the Court determines that the prospects of class certification and final approval justifies giving notice to the class.  The changes to Rule 23(e)(1)(A) now require parties to provide the court with sufficient information to “enable it to determine whether to give notice of the proposal to the class.”  The revisions to Rule 23(e)(1)(B) further provide that class notice will be given if “justified by the parties showing that the court will likely be able to approve” the settlement proposal and “certify the class for purposes of judgment.” 
2. Provides a list of articulated factors in determining whether a proposed settlement is fair, reasonable, and adequate – The Proposed Amendments provide a list of articulated factors to be used in determining whether the proposed settlement is fair, reasonable and adequate.  These factors include considerations of whether (i) the class representatives and counsel adequately represented the class; (ii) the settlement was negotiated at arms-length; (iii) the class members were treated equitably relative to each other; and (iv) the class relief was adequate considering four sub-factors: (a) the costs, risks, and delay of trial/appeal; (b) the effectiveness of the proposed method of class settlement distributions; (c) the terms and timing of proposed attorneys’ fees; and (d) identification of any side agreements.   The list of articulated factors is intended to focus the court and lawyers on areas of core concerns. 
3. Changes to 23(b)(3) class notice – The Proposed Amendments revise Rule 23(c)(2)(B) to permit class notice to be given by mail, electronic, “or other appropriate means.”  Courts will use their discretion to determine “the best notice that is practicable under the circumstances” of a particular case.  The Proposed Amendments clarify that electronic notice, or other appropriate means, may be used in place of traditional notice methods. 
4. Revisions to rules governing class objectors – The Proposed Amendments also seek to revise the rules addressing class member objections.  In an attempt to address baseless class objections, the Proposed Amendments will require an objector to state “with specificity the grounds for the objection.”  They also require an objector to state whether the objection applies only to the objector, a subset of the class, or the entire class.  The Proposed Amendments will also require court approval for payment to an objector or objector’s counsel in connection with “forgoing or withdrawing an objection” or “forgoing, dismissing, or abandoning an appeal from a judgment approving the proposal.”

The Current Status and the Potential Impact Of The Proposed Rule Changes

The public comment period closed on the Proposed Amendments, and the Standing Committee meets in June 2017 on the proposed revisions.  In September 2017, the Judicial Conference meets and the Proposed Amendments may become effective, in whole or in part, in December 2018.

Class action practitioners should continue to follow these important developments as they may have a substantial impact on class action settlements in the future.  The most significant will likely be the frontloading of class settlement information before class notice is provided.  Parties will need to provide sufficient information at the class notice stage that the settlement is fair and reasonable, and address the newly articulated factors set forth in the Proposed Amendments.   The failure to do so will likely lead to delays and additional fees and expenses associated with any re-filing.  In light of the foregoing, the Proposed Amendments certainly bear monitoring in the coming year.           

[i] Proposed Amendments to Fed. R. Civ. P. 23 (2016), http://www.uscourts.gov/rules-policies/proposed-amendments-published-public-comment.

Last week a United States district court judge ruled that a company did not violate the Telephone Consumer Protection Act (TCPA) by making calls to a number that was assigned to VoIP because the consumer plaintiff was not charged for the calls. The case is Klein v. Commerce Energy, Inc., (Case No. 14-105, U.S. District Court, W.D. Pa. June 21, 2017).

A copy of the court’s opinion can be found here. 

Background 

In his third amended complaint, plaintiff Jeffrey Frank Klein (Klein) claims that numerous telephone calls made to him by Collectcents, Inc. (Collectcents) on behalf of Commerce Energy violated the Telephone Consumer Protection Act of 1991, 47 U.S.C. § 227 et seq., and constituted negligence and invasion of privacy under Pennsylvania law. 

The opinion in this case is 58 pages long.  The first nine pages of the opinion are an attempt by the court to provide a procedural history of the case and identify what facts were undisputed. It is clear from a reading of those nine pages that the parties agreed on very little and that the court had already spent considerable time and resources dealing with prior pleadings and hearings in the case. 

Pursuant to a collection Master Services Agreement (MSA) Collectcents provided debt collection services to Commerce Energy. Klein had a VoIP number ending in 0702, which was assigned to him for his Google VoIP service. Klein’s Google VoIP service is a free service. Klein also has Verizon cell service with the number ending in 7489 assigned to that service. 

Collectcents made “numerous” debt collection phone calls regarding another customer’s account to Klein’s VoIP number ending in 0702. In a footnote to the opinion the court wrote: “Collectcents’ records support approximately ninety calls, and by any fair characterization that would constitute numerous calls for the purpose of the court’s analysis.”  The calls were made in error as the 0702 number was incorrectly attached to that other customer’s account. 

The plaintiff claims that the calls to the 0702 VoIP number were then forwarded to his personal cell phone number.

The procedural status of the case was a hearing on the defendant’s motion for summary judgment. 

Editor’s Note:  A motion for summary judgment is based upon a claim by one party (or, in some cases, both parties) that contends that all necessary factual issues are settled or so one-sided they need not be tried. The summary judgment is appropriate when the court determines there no factual issues remaining to be tried, and therefore a cause of action or all causes of action in a complaint can be decided upon certain facts without trial. 

In discussing the court’s role in ruling on a summary judgment motion the court wrote (citations removed): 

“One of the principal purposes of summary judgment is to isolate and dispose of factually unsupported claims or defenses. The summary judgment inquiry asks whether there is a need for trial—“whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.” In ruling on a motion for summary judgment, the court’s function is not to weigh the evidence, make credibility determinations or to determine the truth of the matter, but only to determine whether the evidence of record is such that a reasonable jury could return a verdict for the nonmoving party.” 

The court then discussed Klein’s TCPA claim. The court wrote (citations again removed): 

“VoIP service, which is the service used by Klein and the service to which his 0702 number is assigned, is becoming more commonly used and is provided over broadband connection, cable modem, fiber to the premises (FTTP), digital subscriber line (DSL) or other wireline, and fixed wireless or other connections. The technology converts voice into a digital signal that travels through the internet. VoIP can be used with either a telephone (mobile or land-line) or a PC as the user terminal. This gives different modes of operation: PC to PC, PC to telephone, telephone to PC and telephone to telephone or mobile-to-mobile, all via the internet.” 

There was no dispute that the challenged calls were made to Klein’s VoIP number. The defendants dispute that they can be held liable under the TCPA for any of the calls because Klein cannot show that his VoIP service is a service for which he is charged for calls or even that he otherwise was charged for any of the calls. Klein argued that because the calls to his VoIP number were forwarded (at his request) to his personal cell number, he was charged for the calls and thus eligible for relief under the TCPA. 

The court disagreed: 

“Klein asserts that his VoIP service is not an unlimited calls/flat fee plan and therefore any calls deplete his store of minutes, meaning he is “charged” for the call. The problem with Klein’s argument is not with a flat fee plan versus an itemized VoIP minute plan; rather, it is that his argument wholly contradicts the record evidence that his actual Google VoIP service, which assigned him the number erroneously called, is free. Klein confronts the same problem with his argument that he is charged when the calls are forwarded to his Verizon Wireless service, arguably resulting in a violation of the TCPA, because the Verizon Wireless bills do not show any charges or any deduction from a bundle of minutes for the challenged Collectcents’ calls made to Klein’s VoIP number, whether forwarded or not. Klein failed to provide sufficient evidence for a reasonable jury to find that he was charged for any of the challenged calls as required by § 227(b)(1)(A)(iii).”

The opinion also discussed the plaintiff’s claim that Commerce Energy was vicariously liable for actions of Collectcents.  It also discussed the plaintiff’s other claims: 

The court wrote: 

“Vicarious liability under the TCPA may be established under a broad range of agency theories, including formal agency, apparent authority and ratification. The relationship between the parties is paramount in determining whether there can be vicarious liability. 

The collection MSA pursuant to which Collectcents performs debt collection services, including debt collection calls, labels the status of Collectcents as an “independent contractor,” but a label or express denial of status by the parties to a contract is not alone determinative and the court must consider the actual practice between the parties. 

Viewing the evidence in the light most favorable to Klein, the court concludes that Klein failed to adduce sufficient evidence for a reasonable jury to find, either directly or vicariously, a violation of the TCPA. The court further concludes that Klein’s negligence claim against Collectcents fails for lack of a violation of the TCPA and because the claim does not fall within one of the four scenarios for negligence causing emotional distress. The court finally determines that the claims against Collectcents and Commerce Energy for invasion of privacy are time barred. Accordingly, Collectcents’ motion for summary judgment with respect to Counts I, II and III and Commerce Energy’s motion for summary judgment with respect to Counts IV and V will be granted. Judgment will be entered against Klein and in favor of Collectcents on all counts against it and against Klein and in favor of Commerce Energy on all counts remaining against it.” 

insideARM Perspective 

This case did not get the notoriety of the Reyes, Jr. v. Lincoln Automotive Financial Services, which insideARM wrote about on June 23, 2017, but it involves another very important issue in TCPA litigation. It will be interesting to see whether this issue has additional legs as more and more people utilize VoIP services. 

Yesterday the Consumer Financial Protection Bureau (CFPB) issued a press release announcing they are taking enforcement action against four credit repair companies and three individuals for misleading consumers and charging illegal fees. A copy of the press release can be found here. 

The CFPB alleges that the companies not only charged illegal advance fees for credit repair services, but also misrepresented their ability to repair consumers’ credit scores. 

Per the press release:

“Today, the Bureau is taking action against companies that charged illegal fees and misled consumers about their ability to fix their credit,” said CFPB Director Richard Cordray. “We will remain vigilant about protecting consumers from companies that mislead them to turn a dishonest profit.” 

The press release contains links to two separate complaints and two proposed stipulated final judgments.

The first complaint was filed in federal district court against Prime Credit, IMC Capital, Commercial Credit Consultants, Blake Johnson, and Eric Schlegel.

Commercial Credit Consultants is a Wyoming corporation with a principal place of business in Los Angeles, that has also operated under the name Accurise. It offered and sold credit repair services to consumers from the summer of 2009 until the summer of 2012. Prime Credit, also known as Prime Marketing, LLC and Prime Credit Consultants, is a Los Angeles-based company that offered similar credit repair services from the summer of 2012 through the fall of 2014. IMC Capital is a Los Angeles-based company that provided credit repair services in 2012.  Johnson was the founder and majority owner of Commercial Credit Consultants, Prime Credit, and IMC Capital, while Schlegel was the president and a minority shareholder of Commercial Credit Consultants and Prime Credit.  

The second complaint was filed in federal district court against Park View Law and Arthur Barens.

Arthur Barens owned Prime Credit’s business partner, Park View Law, based in Los Angeles. From March 2013 through September 2014, Prime Credit marketed and sold credit repair services to consumers using Park View Law’s name, and provided credit repair services to consumers who entered into contracts with Park View Law. Park View Law continued to offer and provide credit repair services through a similar arrangement until as late as June 2015.  

The press release also notes that in September 2016, the CFPB filed a lawsuit alleging similar violations of federal law against Prime Marketing Holdings, a credit repair company that partnered with Park View Law from September 2014 to June 2015. The release notes that litigation is ongoing in that matter.  

In the complaints, the CFPB alleges that the defendants made misleading, unsubstantiated claims that they could remove virtually any negative information from consumers’ credit reports and could boost consumers’ credit scores by significant amounts. The CFPB also alleges that the companies attracted thousands of customers through sales calls and their websites, at times targeting consumers who had recently sought to obtain a mortgage, loan, refinancing, or other extension of credit. The CFPB further alleges that the companies charged these consumers millions of dollars in illegal advance fees for their services. The Bureau alleges that these practices violated the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Telemarketing Sales Rule.

Per the proposed judgments all defendants would be prohibited from doing business within the credit repair industry for five years and permanently prohibited from violating the Dodd-Frank Act or the Telemarketing Sales Rule. In addition, there were monetary penalties included.

In the Commercial Credit Consultants matter the proposed judgment includes a civil money penalty against Defendants, jointly and severally, in the amount of $1,530,000. 

In the Park View Law matter, the proposed judgment includes equitable monetary relief in the form of disgorgement against Defendants, jointly and severally, in the amount of $500,000. The Defendants are to pay the monetary amount in two equal installments of $250,000.

The proposed judgments have been filed with the U.S. District Court for the Central District of California, and they are only effective if approved by the presiding judge. 

insideARM Perspective

It is hard not to turn on the television or radio and not hear an ad for credit repair companies. Internet ads and email blasts are also very common. Some of the claims in the advertisements are outlandish, and, at least to this writer’s ear, border on outright lies. Still, there are very legitimate credit repair companies and very legitimate credit counseling organizations. Unfortunately, there are also still some companies that continue to operate in a manner similar to the companies involved in these enforcement actions.

Which of these companies is legitimate and which is operating outside the law? How can a consumer know for sure? The CFPB issued a consumer advisory in September 2016 to alert consumers about companies that engage in potentially misleading credit repair services. 

At a recent meeting of the Consumer Relations Consortium (www.crconsortium.org) with representatives from both the CFPB and the Federal Trade Commission (FTC), the issue of credit repair companies was a featured topic. All parties recognized that legitimate credit repair and credit counseling organizations serve an important role. However, as one can tell from a review of the pleadings in these matters, unscrupulous companies are generating significant revenue and harming consumers in the process. In the words of CFPB Director Cordray, these companies “mislead them (consumers) to turn a dishonest profit.”

The bad actors need to be identified and eliminated. Regulatory bodies such as the CFPB and FTC will act IF and WHEN they become aware of the bad actors. The ARM industry should assist the regulators in identifying the bad actors.

These enforcement actions are a positive statement and hopefully a deterrent to others that operate in a similar fashion in this arena.