Another Fifth Circuit Court to Follow in Creasy’s Footsteps

The Eastern District of Texas recently dismissed a plaintiff’s TCPA claim in Cunningham v. Matrix Financial Services, LLC,  No. 4:29-cv-896 (E.D. Tex. Mar. 31, 2021) for lack of subject matter jurisdiction.

This decision came after the District Court rejected the magistrate judge’s recommendation that subject matter jurisdiction was proper.  The recommendation focused on the Supreme Court’s recent decision in Barr v. American Association of Political Consultants (“AAPC”), 140 S. Ct. 2335 (2020), which held that the government-debt exception violated the First Amendment.  The magistrate judge noted that, following AAPC, the majority of district courts had held that federal courts retained subject matter jurisdiction over TCPA claims brought under § 227(b)(1)(A)(iii) during the exception’s existence.  Those that did not were deemed unpersuasive given that “[t]he Supreme Court in AAPC explicitly found that the government-debt exception in the TCPA was severable from the remainder of the statute and declined to strike down the TCPA’s entire robocall ban.”  Further, the magistrate judge reasoned that “[t]he dispositive inquiry lies in . . . [footnote twelve of AAPC]”, which stated that the AAPC Court’s “decision does not negate the liability of parties who made robocalls covered by the robocall restriction.”

On review of the Magistrate Judge’s Report and Recommendation, the District Court also focused its analysis on AAPC.  It agreed with defendants’ argument that, in finding the government-debt exception unconstitutional, AAPC “invalidated the statutory provision during the exception’s operative time period, thereby stripping federal courts of subject matter jurisdiction over alleged violations of § 227(b)(1)(A)(iii) that occurred from the moment Congress enacted the government-debt exception to the Supreme Court’s invalidation of the exception in AAPC.

In reaching that conclusion, the District Court recounted the Supreme Court’s reasoning in AAPC and concluded that “the root of § 227(b)(1)(A)(iii)’s constitutional infirmity stems from the government-debt exception’s commingling with the pre-2015 version of § 227(b)(1)(A)(iii).  Therefore, fundamental legal logic dictates that whenever the government-debt exception actually interacted with the pre-2015 version of § 227(b)(1)(A)(iii), all violations of § 227(b)(1)(A)(iii) were legally flawed, as they are unable to withstand constitutional scrutiny.”  The court reasoned that footnote twelve—a focus point of the magistrate’s recommendation—is dictum that contradicts the judgment of the Supreme Court in AAPC.  Ultimately, the District Court dismissed the claims without prejudice.

This decision is only the second in the Fifth Circuit finding that a federal court lacks subject matter jurisdiction over a TCPA claim based on AAPC, the other case being Creasy v. Charter Communications, Inc., 489 F. Supp. 3d 499 (E.D. La. 2020).  The majority of district courts presented with the issue have  retained subject matter jurisdiction for TCPA cases unrelated to the government debt-exception during the exception’s existence.  The circuit split deepens as a growing number of courts tackle the issue of subject matter jurisdiction post AAPC and Creasy.  We will continue to monitor and report on these cases and their inevitable appeals.

Justin O. Kay

About the Author: Justin O. Kay

Justin Kay advises and defends business clients regarding their interactions and communications with consumers. He appears regularly on behalf of clients before federal and state courts, federal agencies and independent self-regulatory bodies, such as the National Advertising Division of the Better Business Bureau. Justin’s practice focuses on defending clients in the growing number of complex class actions arising under federal and state consumer protection and privacy laws such as the federal Telephone Consumer Protection Act, the Illinois Biometric Information Privacy Act and the California Consumer Privacy Act. He is a deputy leader of the litigation practice group.

Deanna J. Hayes

About the Author: Deanna J. Hayes

Deanna Hayes represents public and private clients in a variety of corporate and securities matters. Prior to joining the firm’s corporate group, Deanna spent nearly four years in the firm’s business litigation group, where she focused her practice on complex commercial litigation matters in a broad range of areas, including contract disputes and class actions. Her experience ranges from motions practice and discovery to trial preparation and appeals.

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