Courts Confirm Importance Of Human Intervention

A critical issue under the TCPA is the extent to which the statute applies to mobile text messaging platforms. As evident from its title, Congress intended that the TCPA would protect consumers from unsolicited telephone calls, as placed through automated telephone dialing systems (“ATDS”). As early as 2003, the FCC decided that text messages are “calls” under the TCPA, but has not yet addressed the corollary issue of when and whether a text messaging platform might be considered an ATDS.

Two recent decisions from the Northern District of California have now provided at least a partial answer. Remarkably, both decisions follow the FCC’s 2003 anfud 2012 orders expanding the definition of ATDS to include equipment that “autodials” numbers without human intervention from customer calling lists. See In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 27 F.C.C. Rcd. 15391, 15392 n.5 (2012), citing In re Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 18 F.C.C. Rec’d 14014, 14091-92 (2003). The two recent court decisions affirm the converse position: that is, when a text messaging platform requires human intervention to initiate text messages, the platform is not an ATDS.

In the first decision, McKenna v. WhisperText, No. 5:14-CV-00424-PSG, 2015 WL 428728 (N.D. Cal. Jan. 30, 2015), plaintiff alleged that WhisperText violated the TCPA by sending him an unsolicited text invite for its Whisper app. According to plaintiff, the Whisper app automatically solicited new users to send such text invites to contact numbers stored in the user’s smartphone. Upon the user’s consent, the app would upload those numbers to a database, and a third party would automatically disseminate text invites.

WhisperText moved to dismiss, arguing that the Whisper app was not an ATDS because sending texts through the app required “human intervention” – specifically, the user’s election to send text invites. The district court agreed. While accepting the prior FCC orders in this area, the district court found the claim could not meet the requirements under those orders that the texts be sent without human intervention.   The dispositive allegation, the court reasoned, was that defendants’ app “sends SMS invitations only at the user’s affirmative direction.” Defendants accordingly did not use an ATDS to send the text at issue.

The second decision reached a similar conclusion on a motion for summary judgment. In Glauser v. GroupMe, Inc., No. C 11-2584 PJH, 2015 WL 475111 (N.D. Cal. Feb. 4, 2015), plaintiff claimed that he received unsolicited welcome texts from defendants’ GroupMe app in violation of the TCPA. The application allowed users to create a “group” whose members would automatically receive pre-programmed welcome texts. GroupMe moved for summary judgment, arguing in part that the app was not an ATDS, because the app sent messages only in response to user requests.

While the district court again accepted the FCC’s orders on the scope of an ATDS, it also found that the app was not an ATDS, because it required human intervention in form of the user adding mobile numbers to form the group. The court rejected as insufficient plaintiff’s argument that the welcome texts were sent automatically by the app, once the user provided mobile numbers of group members. The district court reasoned that the user’s provision of mobile numbers amounted to “human intervention,” sufficient to place the app outside the scope of the TCPA.

For companies innovating in the area of mobile text platforms, these decisions may prove a much-needed bright line for determining whether a mobile messaging platform might amount to an ATDS so as to come within the requirements of the TCPA. As we have otherwise explained, district courts have taken different views as to whether text platforms might ever fall within the definition of an autodialer. Multiple petitions on the scope of the ATDS definition under the TCPA are pending before the FCC.   On the horizon are expected appellate decisions and further FCC rulings on these topics.

In the meantime, however, the requirement of human intervention may provide a useful marker for identifying how a company might engage with mobile messaging platforms while staying outside of the scope of the TCPA’s restrictions.

2015 Promises to Bring Further Clarity to Whether Defendants Can Moot Class Actions by Mooting the Claims of Named Plaintiffs

The new year is off to a busy start, and it appears 2015 will bring additional Circuit-level clarity to an issue the Supreme Court left open in Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013): whether an offer of complete relief to a named plaintiff in a putative class action moots the named plaintiff’s claim. The resolution of that issue, and the related question whether named plaintiffs can continue to pursue claims on behalf of a putative class after their individual claims become moot, will have a major impact on class action litigation, particularly in cases that seek statutory damages such as those available under the TCPA.

District courts remain split on the issue; indeed, disagreement continues even among courts within the same Circuit. Compare Lary v. Rexall Sundown, Inc., Civil No. 13-5769, 2015 WL 590301 (E.D.N.Y. Feb. 10, 2015) (dismissing putative class claims as moot and entering judgment in favor of named plaintiff individually in accordance with unaccepted offer of judgment that provided named plaintinff with complete relief) with Mey v. Frontier Communications Corp., Civil No. 13-1191, 2014 WL 6977746 (D. Conn. Dec. 9, 2014) (declining to dismiss case as moot where unaccepted offer of judgment provided named plaintiff all the relief she sought on her own behalf and finding that putative class claims still present live controversy).

Near the end of 2014, the Eleventh Circuit adopted Justice Kagan’s dissent in Genesis Healthcare, and concluded that an unaccepted offer of judgment to a named plaintiff in a putative class action is a legal nullity that did not moot the named plaintiff’s claim. Stein v. Buccaneers, L.P., No. 13-15417 (11th Cir. Dec. 1, 2014). A copy of the decision is available here. Although it could have stopped there, the court went further and suggested that, even if the named plaintiff’s individual claim was moot, he still could pursue claims on behalf of the putative class, including claims for statutory damages under the TCPA, pursuant to the “relation back” exception to the mootness doctrine. Under that exception, an “inherently transitory” class action claim that is “capable of repetition, yet evading review” is not necessarily moot upon the expiration of the named plaintiff’s claim, and the court suggested that a defendant’s ability to moot a named plaintiff’s claim for damages through an offer of complete relief is sufficient to render a case inherently transitory. Interestingly, the court acknowledged the “tension” between its analysis on this point and the Supreme Court’s decision in Genesis Healthcare.

In late January 2015, the Fifth Circuit rejected an attempt to expand the “relation back” exception to mootness, and in so doing called into question the Eleventh Circuit’s analysis. In Fontenot v. McCraw, No. 13-20611, 2015 WL 304151 (5th Cir. Jan. 23, 2015), the plaintiffs sued government officials in a putative class action, seeking injunctive relief to correct their driving records. While the case was pending the defendants corrected the named plaintiffs’ records, which the court held rendered their individual claims moot. In analyzing whether the plaintiffs could continue pursuing claims on behalf of the putative class, the court observed that, in Genesis Healthcare, the Supreme Court clarified that the basis for the relation back exception “is focused not on the defendant’s litigation strategy, but on the substance of the plaintiff’s claim,” and undermined the argument that the strategy of “picking off” a named plaintiff in a class action seeking money damages could render a case inherently transitory. Ultimately, the court concluded that because class certification had not been granted and plaintiffs had not even filed a motion for class certification at the time their claims became moot, none of the pre-existing exceptions to the mootness doctrine applied, and held that once the named plaintiffs’ “individual records correction claims became moot, so did the class action case.” A copy of the decision is available here.

Other appeals involving these issues currently are pending in other Circuits and likely will be decided in 2015. See, e.g., Bais Yaakov of Spring Valley v. ACT, Inc., No. 14-1789 (1st Cir.); Tanasi v. New Alliance Bank, 14-1389 (2d Cir.).

Of course, only the Supreme Court can put any doubt to rest once and for all. Notably, a petition for certiorari was filed on January 16, 2015, squarely raising these issues in a TCPA class action. Petition for Writ of Certiorari, Campbell-Ewald v. Gomez, No. 14-857 (U.S.). A copy of the petition is available here. Whether the Court will accept the case remains to be seen. One thing is for certain though: both the plaintiff’s and defense bar will be watching closely.

Fail-Safe Class Fails in the Eastern District of Pennsylvania

In Zarichny v. Complete Payment Recovery Servs., Civ. No. 14-3197, 2015 U.S. Dist. LEXIS 6556 (Jan. 21, 2015), Plaintiff Sandra Zarichny attempted to bring a class action on behalf of two classes against defendants Fidelity National Information Services (“FIS”) and Complete Payment Recovery Services (“CPRS”). Id. at *1-2. Zarichny alleges that the defendants called her eleven times because they incorrectly believed that she owed a debt based on her alleged failure to return textbooks that she rented. Id. at 7-8. In her complaint, Zarichny alleged that the Defendants deliberately harassed her by calling at inconvenient times. Id. at 9. Zarichny alleged that both corporations violated the TCPA and the Fair Debt Collections Practices Act (the “FDCPA”).

Fidelity and CPRS brought a motion to dismiss Zarichny’s complaint and a motion to strike her class allegations, which the court granted in part and denied in part.

First, the Court dismissed FIS after finding that Zarichny failed to allege that FIS made any phone calls and after finding that the circumstances did not warrant holding it liable as a parent corporation. Id. at *15-16. The Court denied CPRS’s motion to dismiss Zarichny’s TCPA claim after finding that CPRS had the burden of proving that Zarichny consented to receiving the calls at issue. Id. at *18. The Court allowed Zarichny to proceed on one FDCPA claim after finding that she had pled sufficient facts to show that CPRS may have violated the written notice provision of the FDCPA. Id. at *26 .

The Court then turned to Defendants’ motion to strike Zarichny’s class allegations. Id. at *26-27. Zarichny sought to bring an action on behalf of two classes; those “‘who received one or more telephone calls from [d]efendants to whom [d]efendants did not send a written notice pursuant to 15 U.S.C. § 1692g,’” and those “‘who received one or more telephone calls from [d]efendants on the individual’s cellular telephone that was initiated using an automatic telephone dialing system.’” Id. at *27. Defendants’ argued that these were “fail-safe” classes because qualification would be based on whether an individual had a valid claim. Id. Zarichny in turn argued that any ruling on class certification would be premature because she had not moved for class certification and that the class definitions could be revised through discovery. Id. at *28.

The Court struck the class allegations due the existence of a fail-safe class. Id. at *29 (“Because plaintiff’s class definitions create impermissible fail-safe classes, we need not consider defendants’ second ground for striking her class allegations…”). While Judge Dalzell acknowledged the existence of a circuit split regarding the permissibility of fail-safe classes, he noted the initial need to consider two criteria before looking to the four requirements of class certification. Id. at *30 (“[O]ur Court of Appeals obliges us to establish two preliminary criteria. We must (1) clearly define the perimeter of the class and the claims to be given class treatment pursuant to Rule 23(c)(1)(B), and (2) determine whether the class is objectively ascertainable.”).

Next, Judge Dalzell then looked to the Third Circuit’s holding in Marcus v. BMW of North America LLC, 687 F.3d 583 (3d Cir. 2012), to determine whether Zarichny’s proposed class was ascertainable. After noting the factors the Third Circuit considered in Marcus, Judge Dalzell noted that “[i]f such ascertainability is not met based on objective criteria the class definition must fail.” Id. at 31-32. Here, Judge Dalzell recognized that the classes were not ascertainable:

A similar problem faces us here. As one commentator explained, “[F]ail-safe classes [are] one category of classes failing to satisfy the ascertainability requirement.” Both classes Zarichny defined are fail-safe classes….Since we are at the outset of this litigation, there is no way to provide notice to that putative class without the sort of extensive fact finding that class actions should avoid. Similarly, at the conclusion the litigation should CPRS prevail against Zarichny, any other putative class recipient would be free to litigate the same claim against CPRS.

Id. at *32-33.

The ultimate problem with a fail-safe class is that its members of a fail-safe class would not be bound by an adverse judgment. Two outcomes exist. First, their claims could be proven on the merits (in which case they are members of the class and enjoy the benefits of the judgment) or they could be disproven (in which case they are not members of the class and are not bound by the judgment). In either case, fail-safe classes are a no-win proposition for defendants that violate the 1966 amendments to Rule 23, which rejected the practice of “one-way intervention” and required that judgments be binding “[w]hether or not favorable to the class.” Fed. R. Civ. P. 23(c)(3); Fed. R. Civ. P. 23(c)(3) 1966 Advisory Committee Notes, Subdivision (c)(3). Judge Dalzell’s opinion recognizes the flawed and unjust results that could emerge from fail-safe classes.

You Still Can’t Violate the FDCPA by Complying With It…

In Gomez v. Oxford Law, 3:14-cv-00477, 2015 U.S. Dist. LEXIS 345, * 3 (M.D. Pa. Jan. 5, 2014), Ninouska Gomez filed suit under the Fair Debt Collection Practices Act (the “FDCPA”) after receiving a message from Oxford Law, which used an autodialer to leave the message. In their statement of undisputed facts, Gomez and Oxford Law agree that Gomez heard the following message: “… please hang up or disconnect. If you are Gomez, Vinouish please continue to listen to this message. There will now be a three second pause in this message.” The message was designed to comply with 15 U.S.C. § 1692c(b), the portion of the FDCPA that prohibits debt collectors from revealing information about a debtor to third parties.

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District of Connecticut Blocks Pick-Off Attempt (Twice)

In Mey v. Frontier Communs. Corp., No. 3:13-1191-MPS, 2014 U.S. Dist. LEXIS 161675 (D. Conn. Nov. 18, 2014), Plaintiff Diana Mey alleged that she received two calls to her cell phone from Frontier’s automatic telephone dialing system. Id. at *2-3. Mey filed a complaint against Frontier and simultaneously moved for class certification. Id. at *4-5. Two months later, Frontier wrote to Mey and offered to settle her claims with a payment of $6,400 plus taxable costs and entry of prospective injunctive relief.  Mey declined. Id. Frontier then moved to dismiss, arguing that the court lacked subject matter jurisdiction because Frontier’s offer had “mooted Ms. Mey’s individual claim and all potential class claims.” Id.

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Pending TCPA Petitions (Grouped by Primary Subject Matter)

As 2015 begins, we thought that providing a roundup of and the links to pending FCC TCPA petitions might be useful. The list includes most pending petitions filed since the FCC’s revised TCPA rules came into effect, with the exclusion of the many “blast fax” petitions for retroactive relief. We have grouped the petitions by primary subject matter (consent, ATDS definition, or other). We will update this list periodically.

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Florida Federal Court Grants Rule 12(b)(6) Motion For Failure To Satisfy Twombly/Iqbal Pleading Standard In TCPA Case

In a TCPA action involving allegedly unsolicited cellular telephone calls made using an automated telephone dialing system (“ATDS”), the Middle District of Florida ruled that plaintiff had merely recited the elements for a claim under the TCPA rather than allege adequate factual support, and dismissed plaintiff’s complaint without prejudice. See Hunter v. Diversified Consultants, Inc., No. 8:14-cv-2198, 2014 U.S. Dist. LEXIS 165355 (M.D. Fla. Nov. 26, 2014). The complaint contained only the following factual allegations: First, that “[d]uring the past 48 months prior to the filing of this complaint, Defendant contacted Plaintiffs’ [sic] cell phone without express permission with an automated dialing system”; and second, “Defendant called Plaintiffs’ [sic] cell phone intentionally and repeatedly, without express permission and with an automated telephone dialing system…” Id. at *2. Although the Court acknowledged it must accept all factual allegations set forth in the complaint and view them in the light most favorable to the plaintiff, it also noted that conclusory allegations, unwarranted factual deductions, and legal conclusions will not prevent dismissal. Id. (citing Ashcroft v. Iqbal, 129 S.Ct. 1937, 1950 (2009); Davila v. Delta Air Lines, Inc., 326 F.3d 1183, 1185 (11th Cir. 2003)). The Court then held that the meager factual allegations included in the complaint did not “create any inference supporting the allegation that calls were made using an automatic dialing system,” and were not sufficient to state a facially plausible claim. Id. (citing Chaparro v. Carnival Corp., 693 F.3d 1333, 1337 (11th Cir. 2012) (“Factual allegations that are merely consistent with a defendant’s liability fall short of being facially plausible.”)).

The FCC’s Clarification of its Blast Fax Rules to “Solicited” Fax Ads under Siege

In an attempt to clear out the backlog of numerous pending petitions addressing how the FCC’s “Blast Fax” rules apply to consensual fax advertisement transmissions, the agency on October 30, 2014 issued an Order addressing the need for and form of opt-out notices required for fax ads. The FCC’s rules since 2006 have contained a requirement that opt-out information be displayed on the faxed ad and that that notification requirement applies to both solicited fax ads, which are sent with the recipients’ prior express permission or invitation, and to non-solicited fax ad transmissions. A large number of Blast Fax lawsuits have involved fax ads reportedly sent with prior express consent but that may have lacked the required FCC opt-out notification or that failed to use the exact language the FCC rule appeared to require. Many defendants in these lawsuits beat a path to the FCC seeking either relief from or clarification of opt-out requirements, claiming in some cases confusion about when opt-out notices were in fact required. In its Order that divided on political party lines, the FCC clarified that its opt-out notice requirements are required on all fax advertisements, but in a far-reaching move, the FCC granted retroactive waivers to the petitioning fax senders who previously sent non-conforming fax ads. Similarly situated fax senders were invited also to seek retroactive waivers of the opt-out notice requirement but were warned they should apply for waiver relief by April 30, 2015.

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Political Campaigns: Consider Yourself Warned

If you had not noticed, the fall election campaign season is in full swing. The FCC’s Enforcement Bureau certainly has noticed, and reacted by releasing an unusual “Enforcement Advisory” this week, reminding campaigns and campaign promoters that there are TCPA limits on permissible uses of prerecorded voice message and autodialed calls in election campaigns. Restrictions on acceptable modes of communication vary depending upon whether a campaign or campaign promoter is delivering a call to a residential landline phone or a cell phone, which can be difficult to tell if a phone number has been recycled. Nevertheless, the Enforcement Advisory highlights a $2.9 million proposed fine levied against Dialing Services, LLC earlier this year for its alleged infractions of FCC requirements and warns all entities engaged in campaign calling and texting that they ignore FCC rules and restrictions at their peril of becoming subject to possible FCC enforcement scrutiny and fines. Fines for violations can go as high as $16,000 per violation, which is computed by call or text rather than by telemarketing campaign found to be impermissible by the Enforcement Bureau. While courts are the favored venue of the plaintiffs’ bar for seeking damages, the FCC’s Enforcement Bureau is aggressively staking out its own regulatory turf as the gubernatorial and congressional campaigns use as many tools as possible to galvanize potential voters.

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Northern District of Illinois Applies Twombly/Iqbal Pleading Standard to Affirmative Defenses in TCPA Case

In a TCPA action involving allegedly unsolicited fax advertisements, the Northern District of Illinois applied the plausibility standard articulated in Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 556 U.S. 662 (2009) to affirmative defenses. See Mussat v. Power Liens, LLC, No. 13-7853, 2014 U.S. Dist. LEXIS 141561 (N.D. Ill. Oct. 6, 2014). We recently discussed a similar TCPA case where the court held that the plausibility standard did not apply, and in doing so sided with the majority view that the textual differences between Rule 8(a)(2) (claims) and Rules 8(b)(1)(A) (defenses) and 8(c)(1) (affirmative defenses) prevented the application of the plausibility standard to affirmative defenses. See Exclusively Cats Veterinary Hospital, P.C. v. Pharmaceutical Credit Corp., No. 13-14376, 2014 U.S. Dist. LEXIS 132440 (E.D. Mich. Sept. 22, 2014). Perhaps because the defendant focused elsewhere in its briefing, the Mussat court simply cited a 25-year-old decision from the Seventh Circuit holding that courts can strike affirmative defenses that do not satisfy federal pleading standards and then recited the requirements of the Twombly/Iqbal plausibility standard. Mussat, 2014 U.S. Dist. LEXIS 141561 at *2.

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