On December 5, 2016 a federal judge in Missouri ruled that under common law Agency Principals a hospital could not be found vicariously liable for potential Telephone Consumer Protection Act (TCPA) violations of a third party collection agency.  The case is Petri v. Mercy Health d/b/a Mercy Hospital St. Louis, Case No. 15-1296, E.D. Missouri).

Background

In July 2010, Defendant Mercy Health (Mercy) entered into a Collection Services Agreement with Valarity, LLC. (Valarity.) Under the agreement, Valarity was to perform various collection services for Mercy including “telephone calls and requests for payment.” The agreement contains a provision stating that Valarity would be acting as an independent contractor for Mercy and that nothing in the agreement should be deemed to create an agency relationship between them. It further states that each party would be solely responsible for the acts, omissions, and control of its own employees.

Plaintiff Joseph Petri (Petri) alleged that Valarity used an automated dialing system to call his cellular phone approximately 26 times between February and April 2014. The calls were made to collect debt that “supposedly arose from medical services claimed to be provided by Mercy to Petri, which was ultimately found to be a mistake.”  Petri claimed that Valarity’s conduct violated the TCPA and because Valarity was acting on behalf of and as an agent for Mercy, Mercy should be held vicariously liable here.

Before the court was a Motion for Summary Judgment brought by Mercy. 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 its Motion for Summary Judgment Mercy argued that it cannot be liable for Valarity’s actions because Valarity was not its agent under common law principles of agency.

In Petri’s response/opposition to Mercy’s Motion for Summary Judgment the Plaintiff’s attorney included references to corporate and tax records that he claimed show that Valarity is actually owned by Mercy.

 

The Court’s Decision

The court granted Mercy’s motion for summary judgment. A copy of the Memorandum and Order can be found here.

The court began its analysis by discussing Principal/Agency common law:

“Agency is the fiduciary relationship that arises when one person (a ‘principal’) manifests assent to another person (an ‘agent’) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act.” Restatement (Third) Of Agency.

Agency is a legal concept that depends upon the existence of certain factual elements: (1) the manifestation by the principal that the agent shall act for him; (2) the agent’s acceptance of the undertaking; and (3) the understanding of the parties that the principal is to be in control of the undertaking.

The party asserting that a relationship of agency exists generally has the burden in litigation of establishing its existence.”

In their Motion for Summary Judgment Mercy argued that Valarity was not its authorized agent and points to the language of its collections agreement with Valarity, which contains a provision explicitly stating that Valarity was not subject to Mercy’s control and was acting as an independent contractor. Mercy also provided an affidavit from one of its vice presidents, confirming that, as stated in the agreement, Valarity did not have the authority to act on Mercy’s behalf and Mercy had no right to control Valarity.

The only evidence submitted by Petri was an affidavit from his attorney, John Yanchunis, attesting that he found corporate and tax records on the internet indicating Mercy is the parent company of Valarity.

The court ruled that, even assuming the records submitted by Petri constitute admissible evidence, it was not enough to create an issue of material fact as to whether Valarity was acting as Mercy’s agent.

The court wrote:

“A close look at the documents cited by Yanchunis reveal that they provide evidence only as to the legal and tax relationship between Mercy and Valarity. They establish nothing about the day-to-day business relationship between the companies, and they provide no evidence that Mercy controlled Valarity’s collections activities. As such, Petri has provided no evidence to indicate that Valarity was acting as Mercy’s authorized agent when it violated the TCPA.”

 

insideARM Perspective

This is not the first and it will not be the last attempt to find a client vicariously liable for TCPA claims against a Third Party collection agency. Plaintiff attorneys everywhere are always in search of the proverbial “deep pocket.” This case had the unusual twist of statements in an affidavit by the Plaintiff’s attorney that the third party collection agency involved in the activity was also owned by the hospital Defendant. 

The result in this case should not be considered the final say on this issue. Facts and circumstances will be different in every case.

The potential exposure for clients is real. What this case tells us is contract language is important. But the analysis should not end there.

Late yesterday afternoon The Department of Education (ED) announced the long awaited results of the RFP for Debt Collection Services. A letter was transmitted via email to all companies that had participated in Solicitation No. ED-FSA-16-R-0009, Debt Collection Services for the U.S. Department of Education (ED), Office of Federal Student Aid (FSA). This was the award for the unrestricted size companies. A copy of the contents of that letter can be found here.

Seven companies received awards. (In October 2014 ED selected eleven companies for the new contract in the small business set aside category.) The announcement indicated that forty-eight (48) proposals were received in response to the solicitation. That leaves forty-one disappointed companies.

The companies that received the award are:

• Financial Management Systems Investment Corp
• GC Services Limited Partnership
• Premiere Credit of North America, LLC
• The CBE Group, Inc.
• Transworld Systems Inc.
• Value Recovery Holding, LLC
• Windham Professionals, Inc.

The award has tremendous financial implications.  Per the letter “The total estimated contract amount is NOT to Exceed $417,100,002.00!”

insideARM has written extensively about the ongoing twists and turns of the RFP.

Our December 14, 2015 article provided a detailed history of the RFP. That article highlighted the cancellation of the then current solicitation (ED-FSA-13-R-0010) and the issuance of a new RFP. The initial deadline for the response was January 22, 2016.  Our  January 14, 2016 article told of ED’s decision to extend the response deadline to February 16, 2016.  Our February 16, 2016 article reported about an additional extension, this time to February 29, 2016.

Things then became quiet on the ED front until July of this year. On July 14, 2016 we reported that two firms, Pioneer Credit Recovery Inc. (Pioneer) and Enterprise Recovery Systems Inc. (Enterprise), had won their appeal of a denied protest over their contracts not being extended in March of 2015.

Since July, interested parties have been waiting to hear from ED. There has been a great deal of speculation about what the Department would do, but that is all it was – speculation. The wait is now over.

insideARM Perspective

This announcement is stunning. Its ramifications will be felt throughout the industry.  It is not just who received the award, but also who was not selected.  A number of firms who have historically had the ED contract were not selected. Those companies include: Account Control Technology, ConServe, EOS-CCA, ERS (now part of Alltran), FAMS, Iqor, Performant, Pioneer, Progressive, VanRu, and West (now part of Alorica).

In February of 2015 ED gave two-year contract extensions to five existing vendors in the unrestricted category: Account Control Technology, Inc., ConServe, Financial Management Systems, GC Services, and Windham Professionals, Inc. It is interesting to note that only three of those five firms received this new award.  It is also interesting to note that neither Pioneer nor ERS, the two firms that had won the appeal of their denied protest, received an award.

insideARM will be following this matter closely in the coming days and weeks. Because of the nature of this contract, the bizarre RFP process, and the financial implications, we suspect there will be protests filed.

We will report additional developments.

The United States Court of Appeals for the Second Circuit has denied a request for an Interlocutory Appeal in the case of Halberstam v. Global Credit and Collection Corp. (U.S. District Court, ED, NY, 15-cv-5696 (BMC), (Second Circuit Court of Appeals Case No. 16-1563).  The issue presented by the original case under the Fair Debt Collection Practices Act (FDCPA) was whether a debt collector, whose telephone call to a debtor is answered by a third party, may leave his name and number for the debtor to return the call — without disclosing that he is a debt collector — or whether the debt collector must refrain from leaving callback information and attempt the call at a later time.

insideARM has written previously about this case. See our January 14, 2016 article here and our May 16, 2016 article here.

In a Memorandum, Decision and Order dated January 11, 2016 United States District Court Brian M. Cogan ruled that the message was, indeed, a FDCPA violation.

On May 5, 2016 the same Judge determined that the decision he rendered in the Halberstam case should be certified for an immediate interlocutory appeal.

Editor’s Note: Interlocutory actions are certified by courts when an issue presents a question of law that should be answered by an appellate court before a trial may proceed or to prevent irreparable harm from occurring to a person or property during the pendency of a lawsuit or proceeding. Generally, courts are reluctant to make interlocutory orders.

The one-page Order from the Second Circuit can be found here. The rationale given was: “immediate appeal is unwarranted. See Klinghoffer v. S.N.C. Achille Lauro Ed Altri–Gestione Motonave Achille Lauro in Amministrazione Straordinaria, 921 F.2d 21, 23–25 (2d Cir. 1990).”

The critical language from the Klinghoffer opinion is:

“When a district judge, in making in a civil action an order not otherwise appealable under this section, shall be of the opinion that such order involves a controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation, he shall so state in writing in such order. The Court of Appeals … may thereupon, in its discretion, permit an appeal to be taken from such order…”

insideARM Perspective

The rationale noted above does not provide much guidance on the Court’s thinking. Apparently the Court felt that the issue presented did not involve a “controlling question of law as to which there is substantial ground for difference of opinion and that an immediate appeal from the order may materially advance the ultimate termination of the litigation.”

ARM industry experts are surprised at the denial of the request for Interlocutory Appeal.  The issue is one that would clearly benefit from a decision from the Court of Appeals. Voice Messages have been the subject of much litigation, significant expense, and disparate direction. To use a common colloquialism, “The issue is clear as mud.”

The CFPB has an opportunity to enact rules to clear up the confusion. The CFPB Outline of Proposed Rules suggests that clarity may be forthcoming in the proposed rules.  Let’s hope that that the CFPB resolves the myriad of issues regarding voice messages.

 

 

This post originally appeared on the Consumer Financial Services Blog and is re-published here with permission.

The U.S. Court of Appeals for the Second Circuit recently held in a non-precedential opinion that a consumer, in the circumstances of this case, did not have standing to bring putative class action claims after entry of judgment in his favor on his individual claims pursuant to the defendants’ offer of judgment under Rule 68 of the Federal Rules of Civil Procedure.

A copy of the opinion is available at:  Link to Opinion.

A consumer filed an individual and putative class action alleging that several companies violated the federal Telephone Consumer Protection Act , 47 U.S.C. § 227, and New York’s General Business Law, § 399-p.

The district court dismissed the consumer’s putative class action claims for a lack of subject matter jurisdiction after the entry of judgment in his favor pursuant to an offer of judgment under Rule 68.  The consumer appealed.

The Second Circuit began its analysis by addressing its prior ruling in Tanasi v. New Alliance Bank, 786 F.3d 195 (2d Cir. 2015).  There, the Second Circuit, contrary to the opinion of other circuits, held that an unaccepted offer of settlement or judgment, on its own, will not moot a plaintiff’s claims.  However, any individual claims are rendered moot where a judgment has been entered and plaintiff’s claims have been satisfied. Subsequently, the Supreme Court of the United States in Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016), came to the same conclusion as the Second Circuit.

The Second Circuit noted that it had not addressed the issue of whether, in all cases, the rendering moot of a plaintiff’s individual claims undermines the plaintiff’s standing to pursue claims on behalf of a putative class.  In Tanasi, the Second Circuit explicitly left open the question of whether unresolved class action claims can ever provide an independent basis for justiciability.  Ultimately, the Court decided not to reach this question here because the consumer did not have any connection to a “live claim of his own” or any cognizable interest in pursuing the class claims.

The Second Circuit cited Campbell-Ewald for the rule that Article III limits federal court jurisdiction to cases and controversies at all stages of review, not merely at the time the complaint is filed.  The Court then distinguished the effect of a putative and a certified class.

The Second Circuit determined that although a certified class may obtain independent status for purposes of standing, where the individual claims of the putative class representative are rendered moot prior to certification, in general, the entire action becomes moot.  Consequently, the Court held that because the consumer was the sole individual representative for the putative class, once his claim was no longer live, no plaintiff remained in a position to pursue the class claims.

The Court acknowledged that in certain circumstances the rendering of a named plaintiff’s individual claim as moot will not remove the basis for the associated class action.  However, the Court determined that none of those circumstances applied to the consumer.  For example, the Second Circuit examined the relation back doctrine, which occasionally allows a court to review a class certification decision even after a plaintiff’s individual claims have been rendered moot.  But that line of cases was inapplicable here because there was no class certification decision or any other reason to link the consumer’s once-live claim to the now-independent class claims.

The Second Circuit then rejected the consumer’s argument that his expectation of an incentive reward as representative of the putative class gave him a personal stake in the class litigation.

The Court noted that standing requires that a plaintiff allege a concrete injury that creates a legally protected interest in pursuing the litigation.  The Court determined that the consumer’s interest in a potential incentive award was merely a purely hypothetical possibility of recovery that did not meet the standing requirements, because an incentive reward is not guaranteed but rather solely within the discretion of the district court after a class is certified and recovery occurs.

Moreover, in this matter there was never a determination as to whether there might be a cognizable class in this case, as he never moved for class certification.  Consequently, the Court held that the consumer did not meet the requirements for standing.

Accordingly, the Second Circuit affirmed the judgment of the trial court.

On Wednesday, November 30th, a collection of ten consumer advocacy groups filed an amicus brief asking the U.S. Court of Appeals for the D.C. Circuit to review its decision en banc in PHH Corp. v. Consumer Financial Protection Bureau (United States Court of Appeals, D.C. Cir., Case No. 15-cv-01177).

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In that case, decided October 11th, 2016, a Court of Appeals panel ruled that the CFPB’s single-director structure is unconstitutional. The CFPB asked the D.C. Court of Appeals for a rehearing by filing a petition on Friday, November 18th, 2016.

The amicus brief filed on November 30th by consumer groups is supporting the CFPB’s petition and focuses on the question of whether the CFPB’s structure is constitutional.

The consumer groups that are signatories to the brief are Americans for Financial Reform, California Reinvestment Coalition, The Center for Responsible Lending, Consumer Federation of America, The Leadership Conference on Civil and Human Rights, The National Community Reinvestment Coalition, The National Consumer Law Center, The National Council of La Raza, United States Public Interest Research Group Education Fund, and the Woodstock Institute.

Per the brief:

“Amici curiae are ten non-profit organizations that advocate for consumer protection and civil rights. Each organization advocated for the CFPB’s creation and frequently appears before the Bureau to advocate for consumer interests. Amici and their members therefore have a strong interest in ensuring that the CFPB remains free from undue political and industry influence, and are uniquely well positioned to explain to the Court why the panel opinion, if left standing, will threaten the Bureau’s ability to protect consumers and imperil Congress’s goal of creating a regulatory environment free of undue industry influence.”

In an earlier, related development, a group of 21 current and former federal lawmakers filed a similar amicus brief in support of the current CFPB structure. That group includes Senator Elizabeth Warren (former Special Advisor for the CFPB), Representative Nancy Pelosi (the U.S. House Minority Leader), Senator Sherrod Brown (ranking member of the Senate Banking Committee), Senator Harry Reid (outgoing Senate Minority Leader), and former Representative Barney Frank (co-author of the Dodd-Frank Wall Street Reform and Consumer Protection Act).

Additionally, the D.C. Circuit entered an order on November 23rd, 2016, directing PHH Corporation to file a response to the CFPB’s November 18th petition for rehearing en banc. The order requires PHH to file its response within 15 days, but the order also invites the Solicitor General to file a response expressing the views of the United States with no deadline.

insideARM Perspective

The filing by consumer groups, along with the previous filing by the group of legislators, showcases the importance of this case and high level of concern that currently exists among some about potential huge changes to the CFPB under a Trump administration.

The D.C. Circuit’s November 23rd ruling is also an interesting variable – given no deadline, the Solicitor General may choose to respond quickly, before President-Elect Trump’s inauguration, or wait to respond at some point after the change in administration.

Many have speculated about what effect Trump’s election may have on leadership at the CFPB, including panelists at last week’s Consumer Federation of America’s Financial Services Conference. One of the panelists, George Mason University’s J.W. Verret, said the relevant short term consequence is whether Cordray will stay for another year. Notwithstanding the PHH case, Trump could state a cause for dismissal, or he could site PHH and dismiss Cordray “at will.” Cordray could dispute either way. But the relevant Supreme Court precedent, the 1935 Humphrey’s Executor v. United States, sought back pay, not reinstatement. He predicted it would be unlikely that the goal of a Cordray dispute would be to get his job back.

insideARM will continue to monitor this crucial case.

A putative class action lawsuit was filed on Monday, December 5, 2016 against five New Jersey law firms alleging that the firms are running a “Mafia-style” racketeering operation that has been targeting ARM (Accounts Receivable Management) companies by filing spurious Fair Debt Collection Practices Act (FDCPA) class actions, initiated primarily to generate attorneys’ fees.

The case is Winters, et.al. v. Jones, et. al, (Case No 2:16-cv-09020, U.D. District Court, District of New Jersey).  A copy of the Complaint can be found here.

The Plaintiffs in the case are Jeffrey A. Winters (Winters) and Collection Solutions, Inc., (CSI) a New Jersey Corporation. Winters is the sole shareholder of CSI. CSI also operates under the trade name of United Credit Specialists (UCS). CSI and UCS are primarily engaged in debt collection services.

The named Defendants are:

• Joseph K. Jones, Esq. (Jones), and Benjamin J. Wolf, Esq. (Wolf). They are attorneys licensed to practice in New Jersey, New York, and Connecticut, who practice as principal Members of Jones, Wolf & Kapasi, LLC (JWKLLC).
• Laura S. Mann, Esq. (Mann). Mann is an attorney licensed in New Jersey and the principal of the Law Offices of Laura S. Mann, LLC (MannLLC)
• Ari H. Marcus, Esq. (Marcus) and Yitzchak Zelman, Esq. (Zelman). Marcus and Selman are attorneys licensed to practice in New Jersey and New York and are the principals in Marcus & Zelman, LLC (MZLLC)

The complaint alleges that starting in 2013 and accelerating since, Defendants have schemed to operate a business plan (RICO Plan) in violation of 18 USCA §1961, et seq., the Federal RICO Statute (RICO), and the similar New Jersey RICO Statute, NJSA 2C:4 l-l, et seq. (NJRICO). 

Editor’s Note: The Racketeer Influenced and Corrupt Organizations Act, commonly referred to as the RICO Act or simply RICO, is a United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization. The State of New Jersey has a similar State Statute.

A sampling of the alleged nefarious conduct includes the following:

• Since about early 2013, Jones, Wolf, JWKLLC, Mann, MannLLC, Marcus, Zelman, and MZLLC, in cooperation with other independent attorneys and individuals serving in various capacities; have conspired to, and have been operating a classic, Mafia style, racketeering “Enterprise” in violation of the Federal and New Jersey RICO Statutes.

• Defendants avoid Small Claims Courts or unprofitable immediate payment of nominal claims without attorney’s fees, by filing spurious putative class actions in Federal Court en masse, on the theory that the vast majority of the relatively deep-pocketed defendants would view a quick settlement for under $100,000 as basically a nuisance claim; with the rare contested case only confirming to Defendants the practical advisability of settling early on a class basis.

• Defendants search out, solicit, and develop professional Plaintiffs retained to pose as theoretical “least sophisticated consumers”; falsely imputing imaginary consequences and the requisite actual damages to those Plaintiffs, when any actual damages are likely prevented by consultation with referring attorneys or Defendants.

• Defendants knowingly ignoring the almost universal absence of actual damages and lack of typicality, while falsely alleging the existence of certifiable plaintiff classes; all the while necessarily knowing that the alleged classes had little or no chance of being certified if there was any critical examination by the Court or adversary counsel of the propriety of certification.

• Defendants settled the spurious class actions while solely considering the class action attorney’s fees; without any consideration or concern for the quality or amount of the settlement’s benefits provided to the alleged class.

• Defendants filed separate lawsuits on behalf of a single alleged class representative against each of several defendant victims, instead of filing a single lawsuit against the several defendant victims.

• Defendants filed separate lawsuits on behalf of several alleged class representatives against a single defendant victim, instead of filing a single lawsuit including the several alleged class representatives against that single defendant victim and/or seeking some form of lasting relief from that single defendant.

• The collective activity evidences the unprofessional, improper, and RICO Plan-implementing practice of multiplying lawsuits to secure increased attorney’s fees as opposed to reducing the number of lawsuits filed to increase individual client benefits and over-all efficiency.

insideARM Perspective

Normally insideARM does not write a story about the mere filing of a lawsuit as there are always two sides to any litigation and the Defendants have not yet had an opportunity to file an Answer to the Complaint.  However, we are making an exception in this case.

The allegations in the Complaint highlight conduct that is sensational, dramatic and, scandalous. Yet, for many ARM firms the alleged conduct may feel quite very familiar.  

ARM businesses spend a significant portion of their budget defending what are often perceived as frivolous claims. The senior management discussion is whether to spend money to defend or spend money to make a case go away. The pure accounting decision is generally that it costs less to settle than to defend.  The emotional impulse is to defend or “fight back.”  It appears that CSI and Winters have chosen to not just defend a lawsuit, they have chosen to fight back.

insideARM will continue to monitor this case and report developments. We suspect there will be many twists and turns.  As aging stage actress Margo Channing, Bette Davis said in the movie All about Eve, “Fasten your seatbelts, it’s going to be a bumpy night.”

 

PITTSBURGH, Pa. — Credit Management Company (CMC) participates in supporting Toys for Tots around the holiday season. The toy drive will run through December 12, 2016. 

“Credit Management Company is always looking for new ways to contribute to the local community, especially during the holidays. With the help of the community and all of us at CMC we hope to bring a smile to dozens of children and provide them with a magical holiday gift this season,” said Joel McKiernan, VP of Sales at Credit Management Company.

Credit Management encourages the Greater Pittsburgh Community to participate in their annual Toys for Tots drive. Please stop by the CMC offices any time Monday – Friday in between the hours of 8:30am – 4:00pm and donate a new, unwrapped toy to the Marine Toys for Tots Foundation.

Company Address:
Credit Management Company
2121 Noblestown Road
Pittsburgh, PA 15205

For directions or additional information regarding the drive please contact Brady Dolan at bdolan@creditmanagmentcompany.com.

About Credit Management Company: Credit Management Company (CMC) is committed to providing its business partners with optimum accounts receivable management, debt recovery, and customer care programs through expertise, knowledge, technology, and communication. For over 50+ years CMC has been delivering exceptional outcomes for healthcare, government, education, and commercial clients. For more information, please visit: www.creditmanagementcompany.com.

About the Marine Toys for Tots Foundation: The Marine Toys for Tots Foundation is a not-for-profit organization authorized by the U.S. Marine Corps to provide fundraising and other necessary support for the annual U.S. Marine Corps Reserve Toys for Tots Program. Now in its 69th year, Toys for Tots provides joy and a message of hope to less fortunate children through the gift of a new toy during the Christmas holiday season. For more information, visit www.toysfortots.org.

On December 1, 2016 a California federal judge issued two rulings in a lawsuit where an attorney/plaintiff accused Dick’s Sporting Goods Inc. (DSG) of sending him text messages in violation of the TCPA.  The attorney/plaintiff survived a Motion to Dismiss by DSG but was deemed not to be an adequate class representative and, as a result, was denied a request for class certification.

The case is Nghiem v. Dick’s Sporting Goods, Inc. (Case No. 8:16-cv-00097, United States District Court, Central District of California). A copy of the Order Denying Defendant’s Motion to Dismiss for Lack of Standing can be found here.  A copy of the Order Denying Plaintiff’s Motion for Class Certification can be found here.

insideARM has previously written about this case. In July of this year the same judge ruled that DSG could not compel arbitration in the case. Our July 6, 2016 story on that decision can be found here.

Background

Plaintiff Phillip Nghiem (Plaintiff or Nghiem) brought this action against Defendants DSG and Zeta Interactive Corporation (Zeta) for violations of the TCPA. Nghiem is a plaintiffs’ attorney who handles consumer and debtor disputes, including TCPA claims. The Complaint sought statutory damages, treble damages, attorney’s fees, and an order certifying a class.

The Complaint alleged that DSG administers a marketing program centered on what they call “mobile alerts”—text messages sent to subscribers. Consumers can sign up for mobile alerts on DSG’s website or by sending a text message with the word “JOIN” to a number associated with DSG, called a “short code.”

On May 4, 2015, Plaintiff enrolled in DSG’s mobile alert program by texting the word “JOIN” to DSG’s short code. Thereafter, on December 6, 2015, Plaintiff texted the word “Stop” to that same short code, indicating that he no longer wished to receive mobile alerts from DSG. DSG sent Plaintiff a text message indicating that he had unsubscribed and would no longer receive mobile alerts.

But, the Complaint alleges that DSG continued to send Plaintiff text messages, including on at least eight particular occasions between December 11, 2015 and January 22, 2016.

The Motion to Dismiss the Complaint

On October 27, 2016, DSG filed a Motion to Dismiss, contending that Plaintiff lacked standing to bring this action in light of the Supreme Court’s recent opinion in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), because Plaintiff had not alleged a concrete and particularized injury in fact as required by Article III of the Constitution. In the alternative, they argued that Plaintiff does not have “prudential standing.”

Editor’s Note: As discussed in our August 18, 2016 article about a professional TCPA Plaintiff: “The issue of “prudential standing” and the arguments made by the parties and Court’s opinion are hyper-technical and best left for a Law School Civil Procedure exam.” 

The Honorable Cormac J. Carney, United States District Court Judge, denied Defendant’s motion to Dismiss. After a lengthy discussion of Spokeo and its aftermath, Judge Carney ruled:

“Based on Spokeo, the Court is satisfied that Plaintiff has alleged an injury-in-fact that is concrete and particularized.”

When considering the issue of “prudential standing” Judge Carney determined:

“The statutory question of the TCPA’s “zone of interests” involves disputed issues of material fact that cannot be resolved by the Court at this early stage of the case. What matters at this early stage are the allegations of the First Amended Complaint (FAC), and those allegations explicitly state that Plaintiff opted out of DSG’s mobile alerts program and yet continued to receive text messages from DSG that violated his privacy. This is all that is necessary for Nghiem to defeat Defendants’ motion.”

The Motion for Class Action Certification

Plaintiff sought to certify a class as “[a]ll persons who, after opting-out of Dick’s Sporting Goods, Inc.’s mobile alerts program, received unconsented text message advertisements from Defendants via Dick’s mobile alerts program.” The FAC alleged that as a result of Defendants’ conduct, “Plaintiff and class members have had their privacy rights violated, have suffered actual and statutory damages, and, under the TCPA are each entitled to, among other things, a minimum of $500.00 in damages for each of Defendants’ violations of the TCPA.” The FAC seeks statutory damages, treble damages, attorneys’ fees, and an order certifying a class.

Judge Carney wrote:

“Under Federal Rule of Civil Procedure 23, district courts have broad discretion to determine whether a class should be certified. The party seeking class certification bears the burden of showing that each of the four requirements of Rule 23(a) and at least one of the requirements of Rule 23(b) are met.

Rule 23(a) provides that a case is appropriate for certification as a class action if: “(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.”

These four requirements are often referred to as numerosity, commonality, typicality, and adequacy.

Judge Carney determined that the numerosity and commonality requirements existed in this case. However, when considering the typicality and adequacy requirements, the Judge decided that those requirements were not met.

When considering typicality Judge Carney wrote:

“Ninth Circuit authority directs district courts not to grant class certification if ‘there is a danger that absent class members will suffer if their representative is preoccupied with defenses unique to it.’ Here, there is such a danger. Defendants will continue to dispute whether Nghiem opted in and out of DSG’s mobile alerts program in good faith and if he suffered any invasion of privacy whatsoever. Indeed, Defendants will argue at every opportunity that (1) Nghiem fabricated this lawsuit; (2) he welcomed and hoped for text messages that violated the TCPA; (3) he is perpetrating a fraud by claiming his privacy was invaded when he received more text messages from DSG after opting out of its mobile alerts program; and (4) he should not be awarded a penny for his lawyer shenanigans. The major focus of this litigation will be on these issues and defenses unique to Nghiem, not on the claims of the class.”

When considering adequacy, Judge Carney wrote:

“Defendants argue that Nghiem is not an adequate class representative because he is subject to defenses that do not apply to the rest of the class and has no credibility. While these arguments primarily relate to typicality, “a named plaintiff who has serious credibility problems or who is likely to devote too much attention to rebutting an individual defense may not be an adequate class representative. Additionally, “[t]he honesty and credibility of a class representative is a relevant consideration when performing the adequacy inquiry ‘because an untrustworthy plaintiff could reduce the likelihood of prevailing on the class claims.

The Court is convinced that if Nghiem is the class representative, he and his counsel will have to devote most of their time and resources trying to refute Defendants’ attacks on his character and his motivations for filing and litigating this lawsuit. This skewed focus and diversion of resources will come at the expense of Nghiem’s ability to vigorously prosecute this case on behalf of the rest of the class and obtain monetary recovery for any members of the class who undisputedly had their privacy invaded when they received unwanted text messages from DSG.” 

insideARM Perspective

This story is interesting to the ARM industry for two reasons.

First. The TCPA/Spokeo discussion is quite topical.  Though, in this instance the court decided that the case should survive a Motion to Dismiss for Lack of Standing.

Second, the portion of the story relating to the denial of class certification is also required reading for companies in the ARM industry that are being sued by alleged “professional” plaintiffs.  Does this case continue a trend in court’s view of TCPA cases started by the June 24, 2016 Opinion and Order in the case of Stoops v. Wells Fargo Bank, NA (Case No. 3-15-83, United States District Court, W.D PA) and continued with the August 8, 2016 decision in  Telephone Science Corporation. v. Asset Recovery Solutions, (Case No. 15-CV-5182, N.D. Ill)?

Here the facts are slightly less salacious. But, the implications are similar. In this case the defendants also believe that the plaintiff/attorney was trying to manufacture a TCPA claim.

It will be interesting to see where this case goes next.

This post originally appeared on the Consumer Financial Services Blog and is re-published here with permission.

The Federal Communications Commission recently denied the national Mortgage Bankers Association’s petition for exemption from the “prior express consent” requirement of the Telephone Consumer Protection Act for certain mortgage servicing calls and texts.

A copy of the FCC’s Order denying the petition is available at:  Link to FCC Order.

As you may recall, the TCPA and the FCC’s implementing rules prohibit autodialed calls and texts “to wireless telephone numbers and other specified recipients except when made: (1) for an emergency purpose; (2) solely to collect a ‘debt owed to or guaranteed by the United States’; (3) with the prior express consent of the called party; or (4) pursuant to a Commission-granted exemption.”

As to the Commission granted exemption, the TCPA allows the FCC “to exempt from the consent requirement robocalls to a number assigned to a cellular telephone service that are not charged to the consumer, subject to conditions the Commission may prescribe ‘as necessary in the interest of the privacy rights [the TCPA] is intended to protect.’”

The FCC noted that it “only exercised this exemption authority in very limited and narrow circumstances—e.g., for time-sensitive messages relating to certain healthcare and financial transaction notifications,” such as when there is “indication of fraudulent transactions or identity theft” but not for example “regarding account communications, payment notifications and Social Security disability eligibility.”

In June 2016, the MBA filed a petition seeking to exempt from the TCPA’s prior express consent requirement non-telemarketing residential mortgage servicing calls to wireless telephone numbers.

These “mortgage servicing” calls would include calls “to determine the reasons and nature of a delinquency and to counsel homeowners on their obligations and potential options,” as well as calls “concerning whether a borrower has abandoned or vacated a property, discussing missing documentation needed to complete a loss mitigation application, and/or determining the homeowner’s current perception of their financial circumstances and ability to repay the debt.”

The MBA explained at length how many of these communications “are required by other federal and state laws or regulations.”  It also noted that “Congress recently directed the Commission to adopt rules to except from the consent requirement calls made solely to collect a debt owed to or guaranteed by the United States,” and that “its requested exemption is necessary to ensure that calls to borrowers are treated uniformly in terms of the prior express consent needed to make the call, regardless of whether the federal government or a private entity owns or insures the mortgage loan.”

The MBA also suggested conditions and requirements for the communications, such as that the calls and texts be “free-to-end user,” and that “mortgage servicers must state the name and contact information of the mortgage servicer; calls must not include any telemarketing, cross-marketing, solicitation, or advertising content; text messages and prerecorded calls must be concise; an easy means of opting out of future messages must be offered; and any such opt-out requests must be honored promptly.”

The FCC disagreed.

Rather than simply making the “free-to-end user” feature a requirement, as requested, the FCC opined that it could not be certain how MBA’s members “would comply with this requirement,” or that “exempted calls would not count against any plan limits on the consumer’s voice minutes or texts.”

Similarly, the FCC discounted and ultimately disregarded the needs of struggling homeowners all over the country, stating that “the public interest in and the need for the timely delivery of the calls described by MBA do not justify ‘setting aside a consumer’s privacy interests in favor of an exemption.’”

Attempting to explain itself, the FCC stated that, “[w]hile the calls MBA describes may help and be welcomed by some consumers, we cannot agree with MBA that they are particularly time-sensitive.”

In particular, the FCC noted, “the various federal agencies and state governments that MBA cites as requiring outbound mortgage servicing calls do not require telephone contact until a borrower is at least 20 to 36 days into the delinquency period,” such that “these messages lack the urgency of robocalls to alert consumers to possible fraudulent credit card transactions on their accounts or data breaches of their identity, when seconds or minutes count.”

The FCC further stated that, “[w]hile these calls may indeed be beneficial and desired by some consumers, mortgage servicers are free to autodial consumers without an exemption by simply relying on the prior express consent a consumer provides when including their wireless phone number on a mortgage application,” and “may also obtain new consent by one of many available means, including by email.”

In addition, the FCC rejected the MBA’s request “to harmonize the practices of callers making calls regarding the collection of a debt owed to or guaranteed by a private entity with those of callers making calls regarding the collection of a debt owed to or guaranteed by the United States,” stating that if Congress “had intended the exception to apply universally, regardless of who owned or guaranteed a debt, it easily could have done so.”

In sum, the FCC opined that it could not be certain that “the exempted calls would be free of charge to called parties.”  Additionally, the FCC opined that mortgage servicers need not “be able to make or send non-time-sensitive robocalls, including robotexts, to consumers without first obtaining consumer consent.”

Therefore, the FCC denied the MBA’s petition.

This post originally appeared as a Sutherland Legal Alert, and is re-published here with permission.

Utility companies continue to face ongoing litigation under the Telephone Consumer Protection Act (TCPA) that can arise from the use of automated communications with customers for purposes of marketing, customer servicing and collections. Recently, a New York federal court granted preliminary approval of a $1.1 million class action settlement involving a gas and electric utility that was alleged to have made more than 450,000 automated telemarketing calls to cellular telephone numbers. Sutherland represented the utility company through protracted litigation and negotiated the class settlement. More generally, utility companies are continuing to face litigation and compliance challenges under the TCPA.

Abramson v. Alpha Gas & Electric

Alpha Gas is one of many energy utility companies that has faced litigation under the TCPA over the past several years. Similar to dozens of other cases, the plaintiff alleged that the company violated the TCPA by making telemarketing calls using an autodialer. The plaintiff alleged in the complaint that he heard a click upon answering his phone, after which the call was transferred to a live operator. The plaintiff, through an expert, alleged that the company made more than 450,000 autodialed calls to more than 250,000 unique cellular telephone numbers.

After more than a year of litigation, during which the company raised defenses based on standing and mootness, the case was settled for $1.1 million. The United States District Court for the Southern District of New York granted preliminary approval of the proposed settlement on November 10, 2016, with a final approval hearing set for early 2017. The settlement includes a common fund from which payments will be made to all class members who submit valid claims. 

The TCPA Continues to Impact the Energy/Utility Industry

The TCPA continues to raise litigation and compliance challenges across the energy industry, with dozens of new TCPA lawsuits being filed against the industry each year. The allegations in these cases frequently relate to the efforts of companies to communicate with customers and potential customers by telephone and text message. 

Recent litigation has challenged both marketing calls and non-marketing calls, such as servicing and collection calls. For example, in one case, a federal district court considered allegations that a company placed marketing calls regarding its solar power installation services. Waterbury v. A1 Solar Power Inc., No. 15CV2374, 2016 WL 3166910, at *4 (S.D. Cal. June 7, 2016). The court granted in part and denied in part a motion to dismiss, finding that one plaintiff had failed to adequately allege use of an autodialer to make the calls, whereas the other plaintiff sufficiently stated a claim that the call was made with an autodialer for marketing purposes. 

In another recent decision, a federal district court dismissed claims against a gas and electric utility arising out of more than 200 collection calls allegedly made to the plaintiff. The energy company was dismissed from the case on summary judgment, with the court holding that the calls had been made by a third party and not on behalf of the company. Klein v. Just Energy Grp., Inc., No. CV 14-1050, 2016 WL 3539137, at *4 (W.D. Pa. June 29, 2016). Both of these cases illustrate the types of litigation being filed against the industry under the TCPA.

An Order from the Federal Communications Commission (FCC) earlier this year is unlikely to halt the flow of new cases. On August 4, 2016, the FCC ruled in a declaratory order that utility companies may make robocalls and send automated texts to their customers concerning matters closely related to the utility service, without violating the TCPA, if the calls are made to the number provided by the customer. The FCC reasoned that such communications, including those relating to planned or unplanned service outages, do not violate the TCPA because utility customers are deemed to have provided consent to receive these calls and texts when they gave their phone numbers to the utility company. Although utilities benefit from having certainty in rules, the victory is a hollow one because the FCC still requires prior express consent for all automated calls and texts to cell phones. Utilities can gain some measure of comfort in the FCC’s ruling but must remain vigilant in maintaining proper records, if needed, to prove customer consent and must maintain current, up–to-date records of customer contact information, especially cell phone numbers.

As with virtually all consumer-facing industries, the TCPA challenges of the energy/utility industry are expected to continue as companies seek to protect themselves from a continuing wave of litigation.