Friday, January 18, 2019

FYI: 11th Cir Rejects FDCPA Claim That Debt Collector Misidentified the Creditor

The U.S. Court of Appeals for the Eleventh Circuit ("Eleventh Circuit") recently affirmed the dismissal of a consumer's complaint alleging that a collection letter violated the federal Fair Debt Collection Practices Act, 15 U.S.C. 1692, et seq. (FDCPA) by failing to meaningfully convey the name of his creditor, as required.

 

In so ruling, the Eleventh Circuit concluded that dismissal was appropriate because the consumer did not claim that the collector misidentified his creditor, and the 'least sophisticated consumer' who had been a patient at a hospital would surely understand the hospital to be the creditor when its name was listed next to the amount of the debt on the letter.

 

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

 

A consumer ("Consumer") accrued debt from personal medical services rendered in 2015. The next year he received a letter ("Collection Letter") from a purported debt collection agency ("Collector"), which indicated that it was seeking collections on the "account(s) indicated below," and listed the medical service provider's name ("Provider") next to a service date, a patient name, and an outstanding balance of $412.  The Collection Letter did not expressly refer to Provider as the creditor. 

 

Notably, although the Collection Letter incorrectly named the Provider in a different word order ("Medical Center Enterprise," rather than "Enterprise Medical Center"), the Consumer did not allege that this caused any confusion, or that the two were different entities.

 

The Consumer sued the Collector, alleging that the Collection Letter failed to "meaningfully convey the name of the creditor to whom the debt is owed," in supposed violation of subsection 1692g(a)(2) of the FDCDPA.  The Collector moved to dismiss, arguing that the letter contained the name of the creditor, even though it did not apply the descriptive term "creditor." 

 

Applying the "least sophisticated consumer" standard, the trial court granted the motion to dismiss, finding it implausible that the Consumer would fail to grasp that the Provider was his creditor after reading the Collection Letter as a whole.  The instant appeal ensued.

 

The Eleventh Circuit first noted that the parties and trial court assumed that the "least sophisticated consumer" standard applies here, despite the fact that the Eleventh Circuit had not adopted this standard to evaluate the validity of a debt collector's notice under 1692g.  However, the Eleventh Circuit declined to resolve that issue here.

 

On appeal, the Consumer argued that the trial court erred for two reasons: (i) that it was plausible that the Collector misidentified his creditor, and; (ii) that the least sophisticated consumer would not understand his creditor's identity.

 

In addressing the Consumer's first argument, the Eleventh Circuit noted that the complaint itself failed to allege a misidentification as to the creditor, as required.  Instead of alleging facts establishing that the Collector failed to effectively convey the name of the creditor, the complaint merely disputed the effectiveness of the Collection Letter. 

 

Accordingly, even evaluating the plausibility of a claim based on the allegations therein in a light most favorable to the plaintiff Consumer, the district court did not err in granting dismissal, because the complaint made no such claim that the Collector misidentified his creditor.   Iqbal, 556 U.S. at 678, 129 S. Ct. 1937.

 

The Eleventh Circuit also rejected the Consumer's argument that the least sophisticated consumer would not understand the debt collector's statement of his creditor's identity.   Noting that the consumer acknowledged that the Collector sent the Collection Letter to collect a upon a purported debt incurred for medical services from the Provider, the Eleventh Circuit opined that the least sophisticated consumer could be expected to connect the dots to understand that the Provider was the creditor, because the Collection Letter listed the Provider's name next to an outstanding balance.  

 

Moreover, the only other entity referenced in the Collection Letter was that of the Collector, which explicitly identified itself as the collection agency.   Thus, the Consumer had no valid argument that the least sophisticated consumer would think the creditor was anyone other than the Provider, as "the debt collector is obviously the agent of the creditor," as opposed to the creditor itself.   Caceres v. McCalla Raymer, LLC,755 F.3d 1299, 1304 (11th Cir. 2014).

 

Accordingly, because the Consumer failed to state a claim under section 1692g of the FDCPA, the Eleventh Circuit affirmed the trial court's order dismissing the Consumer's complaint.

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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Monday, January 14, 2019

FYI: Ohio Sup Ct Holds Mortgagee May Use Parole Evidence to Show Intent of Mortgagor

The Supreme Court of Ohio recently held that a mortgagee may enforce a mortgage against a mortgagor who signed, initialed, and acknowledged the mortgage even though the body of the mortgage agreement does not identify the mortgagor by name.

 

In so ruling, the Supreme Court of Ohio allowed a mortgagee to use parole evidence to determine the mortgage signatory's intent where there is an ambiguity.

 

A copy of the decision is available at:  Link to Opinion

 

A bank issued a mortgage loan to husband and wife borrowers.  Only the husband executed the note. Both borrowers signed the mortgage and acknowledged this before a notary public.  Both borrowers initialed every page of the mortgage, including a page that contained the property's legal description.

 

In 2014, the borrowers filed a Chapter 7 bankruptcy.  The bankruptcy trustee sought a declaration that the mortgage did not encumber the wife's interest in the property because the body of the mortgage did not identify her. 

 

After a trial, the bankruptcy court used extrinsic evidence and the mortgage to conclude that the wife borrower "executed the mortgage with the intent to pledge her interest in the property."  The Trustee appealed.

 

Given conflicting Ohio law on this issue, the Bankruptcy Appellate Panel for the U.S. Court of Appeals for the Sixth Circuit certified to the Supreme Court of Ohio the question of whether a mortgage agreement is invalid and unenforceable against the interest of a person who initialed, signed, and acknowledged the mortgage when the body of the mortgage does not identify the person by name. 

 

The Supreme Court of Ohio initially observed that Ohio statutes prescribe any mortgage formalities that may exist.  Specifically, a mortgage pledges all of the mortgagor's interest except where the mortgage makes it clear that the mortgagor "intended to convey or mortgage a less estate." R.C. 5301.02. A mortgagor must sign and "officially acknowledge before a notary public or other authorized official that" they signed the mortgage, R.C. 5301.01(A), "for the purposes stated in the mortgage," R.C. 147.541(C)(1).  When a mortgagor executes a mortgage with a legible signature, the mortgage does not have to include their name in writing elsewhere to be valid for recording.  See R.C. 317.11. 

 

The Supreme Court of Ohio noted that Ohio's statutes do not require the mortgage to include the mortgagor's name "in the agreement other than in the mortgagor's signature and acknowledgement" to give the mortgage "operative effect." Thus, because Ohio does not formally require including a mortgagor's name in the body of a mortgage, "the failure to include a signatory's name in the body of a mortgage is not fatal to the instrument as a matter of law."

 

The Supreme Court of Ohio also declared that courts may look to general contract rules to interpret a mortgage.  The main goal "is to ascertain and give effect to the intention of the parties" by looking at "the writing of the contract" as a whole.

 

Generally, a contracting parties' signature manifests their intent to have the contract bind them.  When there is any ambiguity over which party to charge on a contract, the signature can demonstrate the intent to be bound by a contract's terms and fix "the actual identity of the party."

 

Further when the body of a contract does not identify a party by name, this alone does not "negate a signatory's intent to be bound by the contract." Thus, "a person who is not identified in the body of a mortgage, but who signs and initials the mortgage, is a mortgagor of his or her interest so long as the mortgage agreement as a whole evinces the person's intent to be bound through his or her signature."

 

Therefore, the Supreme Court of Ohio held that "the failure to identify a signatory by name in the body of a mortgage agreement does not render the agreement unenforceable as a matter of law against that signatory." 

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia  |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Texas   |   Washington, DC

 

 

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Wednesday, January 9, 2019

FYI: 9th Cir Holds "Unlawful Information Collection and Sharing" Class Action Improperly Removed Under CAFA

In a 2-1 decision, the U.S. Court of Appeals for the Ninth Circuit held that a putative class action against state entities and a private contractor for allegedly collecting and sharing personal data without authorization was essentially a local controversy and was therefore correctly remanded to state court under an exception in the federal Class Action Fairness Act ("CAFA").

 

Accordingly, the Ninth Circuit affirmed the ruling of the trial court remanding the matter to state court. 

 

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

 

The plaintiffs ("Plaintiffs") sought to maintain an action in state court on behalf of a class of users of a bridge against two entities of the State of California ("State Entities") and a private company ("Company") that contracted with the State Entities to operate the bridge's toll system.

 

Plaintiffs' principle claims alleged the defendants violated the California privacy statutes prohibiting collection of personal data when they collected personally identifiable information from people driving over toll bridges and then shared the information with various unauthorized third parties.

 

The Company removed the action to federal court under CAFA.  Plaintiffs then moved to remand arguing, among other things, that removal was precluded under 28 U.S.C. § 1332(d)(5)(A) because the Company was acting on behalf of the state even though it is a private company.

 

The trial court concluded that the Company qualified as a state entity because it was exercising the authority of the state with respect to the alleged violation of the Plaintiffs' privacy rights.

 

The trial court held that the Company had the burden of satisfying section 1332(d)(5)(A) and because the burden was not met, removal was improper.  The trial court therefore remanded the matter to state court. 

 

The Company then appealed.

 

As you will recall, under CAFA, a trial court shall have jurisdiction over a class action when: (1) the amount in controversy exceeds five million, and (2) any class member is a citizen of a state different from any defendant.  28 U.S.C. 1332(d)(2). 

 

However, CAFA creates an exception from federal court jurisdiction for cases targeting state, local and other government entities that may claim immunities.  See 28 U.S.C. § 1332(d)(5)(A). 

 

On appeal, the Company argued that the trial court erred because it relied on 42 U.S.C. § 1983 case law to determine that it was a state actor, and that the trial court failed to address the language of CAFA's statutory exception relating to "other governmental entities against whom the trial Court may be foreclosed from ordering relief."

 

The Company's position was that it was a private entity outside the scope of 28 U.S.C. § 1332(d)(5)(A).  It further "accurately point[ed] out that Section 1983 cases are not controlling because the § 1983 state actor analysis looks to an actor's role and conduct while the CAFA inquiry goes to the nature of the entity itself." 

 

Thus, the Company argued, the "trial court's exclusive reliance on § 1983 was not appropriate," rather the "issue is whether [the Company] may be considered an instrumentality of the state." 

 

The Ninth Circuit disagreed, noting that "[th]he trial court's analysis, however, also focused to some extent on the relationship between [the Company] and the state entities ultimately responsible under California law for collecting bridge tolls.  [The Company] is an entity acting on behalf of the state to perform toll related functions required by the statute."

 

As you may recall, the Eleventh Amendment of the United States Constitution provides that "[t]he Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State," which means private individuals may not sue non-consenting state entities in federal court. 

 

Moreover, the Ninth Circuit noted, the state need not be named as a defendant, rather "[t]he Supreme Court has held that 'the reference to actions 'against one of the United States' encompasses not only actions in which a State is actually named as a defendant, but also certain actions against state agents and state instrumentalities.'"

 

"To determine whether an entity is able to invoke such immunity our Court has said we generally look to a number of factors: (1) whether a money judgment would be satisfied out of state funds, (2) whether the entity performs central government functions, (3) whether the entity may sue or be sued, (4) whether the entity has the power to take  property in its own name or only the name of the state, and (5) the corporate status of the entity."

 

In reviewing those factors, the Ninth Circuit ruled that the Company "satisfies the second factor of performing a central government function and it has not asserted that it lacks any of the other characteristics," but the "record does not reflect whether it may satisfy the other factors." 

 

Moreover, "the Mitchell factors are not particularly useful when applied to a private entity because a private entity cannot be an arm of the state when the relationship to the sovereign is by contract only," and "[o]ur case law provides not clear answer as to whether [the Company] qualifies as a governmental entity within the meaning of CAFA."

 

Nevertheless, the Ninth Circuit continued, "[w]e need not decide whether the trial court erred in remanding on the 'other governmental entit[y]' ground pursuant to § 1332(d)(5)(A) because there is a further justification for remand.  The plaintiffs correctly content that the result is required by provisions of CAFA calling for local actions to be heard in state court.  The local controversy exception is one of several exceptions to CAFA removal jurisdiction."

 

Under this exception, "a trial court is required to decline jurisdiction over a class action when: (1) more than two-thirds of the proposed plaintiff class(es) are citizens of the state in which the action was originally filed, (2) there is at least one in-state defendant against whom 'significant relief' is sought and 'whose alleged conduct forms a significant basis for the claims asserted' by the proposed class, (3) the 'principal injuries' resulting from the alleged conduct of each defendant were incurred in the state of filing, and (4) no other class action 'asserting the same or similar factual allegations against any of the defendants' has been filed within three years prior to the present action."

 

In analyzing these factors, the Ninth Circuit determined that "[m]ost of these requirements are met."

 

In so ruling, the Court held that "[t]his is essentially a dispute between those who use the bridge to travel between Marin County, California and San Francisco, California, and defendants who are charged with operating the bridge on behalf of the State of California.  The trial court properly ruled that the case against [the Company], a toll collector, belongs in state court with the California entities that manage the bridge's maintenance and operation." 

 

Accordingly, the ruling of the trial court was affirmed. 

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia  |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Texas   |   Washington, DC

 

 

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Sunday, January 6, 2019

FYI: 8th Cir Holds Property Damage Insurer Improperly Withheld "Labor Depreciation" from Claim Payments

The U.S. Court of Appeals for the Eight Circuit recently affirmed a trial court's order certifying a class of Arkansas homeowners against an insurer that improperly withheld amounts for labor depreciation when paying covered property damage claims under their insurance policies.

 

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

 

A putative class of Arkansas homeowners ("insureds") sued their insurer alleging that between November 21, 2008 and December 6, 2013 the insurer improperly withheld labor depreciation costs when paying insureds for covered property damage under their insurance policies. 

 

The insureds based their claims on an Arkansas Supreme Court ruling which held that an insurer may not depreciate labor when determining the actual cash value ("ACV") "of a covered loss under an indemnity insurance policy that does not define the term 'actual cash value.'"  A statute that permitted this practice after August 1, 2017 later superseded this holding.

 

The insurer's policy provided its insureds with replacement cost value ("RCV") benefits for covered property damage.  The insurer agreed to first pay the ACV "of the loss of the damaged part of the property" before their insureds made any repairs so long as paying this benefit did not exceed the policy limit or the actual cost "to repair or replace the damaged part of the property." 

 

The insurer calculated the ACV payments by estimating "the amount it would cost to repair or replace damaged property" and then subtracting the depreciation. 

 

The policy does not require the insured "to use this ACV payment to actually make repairs to the property." If the insured elected not to repair the property damage or repaired the damage for less than the ACV payment, then the policy did not require the insured to return any overpayment to the insurer.  If the insured repaired the property and could document that they "incurred costs greater than the ACV payment," then the policy required the insurer to pay the insured the actual RCV amount.

 

The trial court certified the class under Rule 23(b)(3) and this appeal followed.

 

As you may recall, before a trial court may certify a class under Rule 23(b)(3), it must find that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." Fed. R. Civ. P. 23(b)(3). 

 

The insurer argued that the insureds could not meet the predominance and superiority requirements because individual issues of liability and damages for each plaintiff precluded using common evidence to prove liability and damages.  The Eight Circuit rejected this argument finding that the trial court did not abuse its discretion because whether the insurer violated its contractual obligations by depreciating labor when calculating ACV, "is a common question well suited to classwide resolution."

 

The insurer also argued that the Eight Circuit's recent ruling in LaBrier demonstrated that the insureds could not show predominance, as required.  In re State Farm Fire & Casualty Co. (LaBrier), 872 F.3d 567 (8th Cir. 2017).

 

A class of plaintiffs in LaBier sued the same insurer under Missouri law alleging that the insurer "breached its contracts by deducting labor depreciation from their ACV payments."  Missouri law defined ACV "as the difference between the reasonable value of the property immediately before and immediately after loss." The plaintiffs in LaBier did not demonstrate predominance because the insurance policy did not specify how to calculate ACV payments.  Thus, whether the insurer used a methodology that "produced a reasonable estimate of the difference in a property's value before and after a loss was a question for the jury to determine on a case-by-case basis."

 

The Eight Circuit distinguished LaBrier because the policy here defined ACV payments as ""the amount it would cost to repair or replace damaged property, less depreciation."  The relevant Arkansas law at the time prohibited depreciating labor "when using this formula." 

 

Thus, certification under Rule 23(b)(3) was appropriate because  "the only dispute is over including labor depreciation in the calculation, which is a discrete portion of the formula that is easily segregated and quantified."

 

The insurer argued that class certification was inappropriate because plaintiffs that "completed their repairs at or below the cost of the ACV payment, or who ultimately received RCV payments," lacked standing because they could not show an injury-in-fact.  The Eight Circuit rejected this argument because "all individuals who received an improperly-depreciated ACV payment suffered a legal injury -- breach of contract -- regardless of whether the ACV payment was more than, less than, or exactly the same as the ultimate cost of repairing or replacing their property." 

 

The Eight Circuit therefore found that this is a merit question that does not defeat certification because the trial court may amend the class definition at any time before judgment. 

 

The insurer also argued that argued that res judicata bars some of the plaintiffs' claims because they are parties to a separate class settlement. The Eight Circuit dealt with this by instructing the trial court to modify the certification order to exclude any plaintiffs that are parties to the settlement from the class definition.

 

Accordingly, the Eight Circuit affirmed in part and reversed in part, the trial court's judgment and remanded for further proceedings consistent with its opinion.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia   |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.


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Thursday, January 3, 2019

FYI: 7th Cir Upholds Denial of Class Cert in TCPA Cases Due to Individualized Issues of Consent

On a consolidated appeal for purposes of disposition, the U.S. Court of Appeals for the Seventh Circuit recently affirmed the trial courts' rulings denying class certification to lead plaintiffs who received faxed advertisements that allegedly did not comply with the Telephone Consumer Protection Act (TCPA), 47 U.S.C. 227 and the Federal Communication Commission's Solicited Fax Rule.

 

In so doing, the Seventh Circuit, relying upon D.C. Circuit's 2017 decision in Bais Yaakov of Spring Valley v. FCC, regarding the validity of the FCC's 2006 Solicited Fax Rule, concluding that class treatment was not a superior mechanism for cases involving unsolicited faxes, as the question of consent is likely to vary from recipient to recipient.

 

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

 

In the first of two underlying class action cases brought by two plaintiffs ("Plaintiffs") alleging violations of the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. 227, et seq., an insurance wholesaler ("Plaintiff 1") received two identical one-page faxes from an insurance company's affiliate or subsidiary ("Insurer"), created by the insurance company's marketing department. 

 

Though Plaintiff 1 contracted with the insurance company and agreed that it "may choose to communicate with [him] through the use of.. facsimile to [his].. facsimile numbers," and provided the number at issue, the fax number was shared by seven other insurance agents, and the fax at issue was not directed to Plaintiff 1 or any specific person or entity.

 

Plaintiff 1 filed a putative class action suit in Illinois state court, raising claims against the Insurer, arguing that the faxed advertisements violated the TCPA and the FCC's Solicited Fax Rule. 

 

As you may recall, as amended by the Junk Fax Act, the TCPA prohibits the use of "any telephone facsimile machine … to send, to a telephone facsimile machine, an unsolicited advertisement."  47 U.S.C. § 227(b)(1)(C).  The TCPA defines an unsolicited advertisement to mean "any material advertising the commercial availability or quality of any property, goods, or services which is transmitted to any person without that person's prior express invitation or permission, in writing or otherwise." Id. § 227(a)(5).  Although exceptions to the prohibitions on sending unsolicited faxes exist, the faxes must contain a notice meeting certain requirements, including a statement that the recipient may opt out from future unsolicited ads.  Id. § 227(b)(2)(D).

 

The FCC's 2006 amendment to the rules governing facsimile transmissions, known as the "Solicited Fax Rule," took this requirement a step further, declaring that all faxes, not just those that are unsolicited, must include an opt-out notice that informs the recipient of the ability and means to avoid future unsolicited advertisements.  47 C.F.R. § 64.1200(a)(4)(iv).

 

The Insurer removed the action to federal court and raised affirmative defenses of pre-existing business relationship and consent, pointing to the contractual language in Plaintiff 1's contract with its parent or affiliated insurance company, and the opt-out language on the fax itself. 

 

Nonetheless, the trial court certified a class under Fed. R. Civ. P. 23(b)(3) of recipients of faxes that advertised insurance products sold by the Insurer, over the Insurer's plea that it should wait until the FCC had a chance to rule on the Insurer's request for a retroactive waiver of the "Solicited Fax Rule" and until the D.C. Circuit handed down its decision in the case of Bais Yaakov of Spring Valley v. FCC, then-pending before the D.C. Circuit. 

 

On November 2, 2016, the FCC's Consumer & Governmental Affairs Bureau granted the Insurer's petition for a waiver, and on March 31, 2017, the D.C. Circuit issued its opinion in Bais Yaakov (Bais Yaakov of Spring Valley v. FCC, 852 F.3d 1078 (D.C. Cir. 2017)), which held that the FCC had exceeded its authority under the TCPA when it issued the Solicited Fax Rule. The Insurer promptly moved to decertify the class, and the trial court did so on August 28, 2017. Plaintiff 1's petition under Rule 23(f) for immediate review of the decertification decision was granted by the Seventh Circuit.

 

In the second underlying case consolidated in this appeal, a distributor of office, technology and industrial products and supplies and its affiliates ("Distributor") sent a fax to a kennel and veterinary sanitation company ("Plaintiff 2"), advertising commercial products from one of its subsidiaries.  Plaintiff 2 filed a class-action suit against the Distributor in the Northern District of Illinois, alleging that the faxes violated the TCPA and the Solicited Fax Rule because they did not include the required opt-out language.  Plaintiff 2's case was consolidated in the trial court with a similar suit against the Distributor, initially filed in Illinois state court and removed by the Distributor to the federal trial court. 

 

After the trial court denied the Distributor's motion to dismiss or strike, the D.C. Circuit issued its decision in Bais Yaakov, which compelled the Distributor to file a motion to deny class certification.  Plaintiff 2 argued that the opt-out notice on the majority of the fax templates used by the Distributor failed to comply  with the requirements of the Solicited Fax Rule by failing to: (i) provide a fax number for opt-out requests; (2) state that it is unlawful for the sender not to respond within a reasonable time; and (3) state that the recipient must identify the fax number to which the request relates.

 

The trial court denied class certification as to Plaintiff 2, distinguishing the facts from the Seventh Circuit's ruling in in Holtzman v. Turza, 728 F.3d 682 (7th Cir. 2013) (holding that TCPA requires a compliant opt-out notice before a consent-based defense can prevail), and adopting the D.C. Circuit's ruling in Bais Yaakov striking down the Solicited Fax Rule, calling the decision "binding" or at least "persuasive."  Plaintiff 2 sought interlocutory review, which was granted by the Seventh Circuit in the instant consolidated appeal.

 

On appeal of the orders which denied class certification to Plaintiff 1 and Plaintiff 2 ("Plaintiffs"), the Seventh Circuit initially noted that the FCC's 2014 "Anda Order" (In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, 29 FCC Rcd. 13998 (2014)) upheld the validity of the Solicited Fax Rule, but announced that it would grant retroactive waivers in light of the confusion it had produced.  Affected parties, including the Insurer and Distributor ("Defendants") petitioned the D.C. Circuit for review of the Anda order, and the result was the Bais Yaakov decision --"that the FCC's 2006 Solicited Fax Rule is unlawful to the extent that it requires opt-out notices on solicited faxes," and "[t]he FCC's Order in this case interpreted and applied that 2006 Rule."  852 F.3d at 1083.

 

The parties in the instant appeal debated whether the D.C. Circuit's ruling was formally binding upon the appellate court under the Hobbs Act, and whether Bais Yaakov adjudicated the validity of the Anda Order, or reached all the way back to rule on the validity of the original 2006 Solicited Fax Order. As you may recall, the Hobbs Act, 28 U.S.C. 2112(a)(3) provides exclusive jurisdiction to the court of appeals to review FCC orders in either the D.C. Circuit or a regional court.

 

The Seventh Circuit concluded that the D.C. Circuit's ruling undoubtedly vacated the 2014 Anda Order held that its application of the 2006 Order, which imposed the Solicited Fax Rule, was unlawful.  Though the 2006 Order remained in effect (albeit with less force), the Seventh Circuit held that the D.C. Circuit's ruling must be construed consistently by all courts of appeals under the Hobbs Act. 

 

Thus, the only issue left before the Seventh Circuit was whether, against the backdrop of these Orders, the trial courts abused their discretion in denying class treatment.

 

For purposes of the class certification decision, the Seventh Circuit stated that the legality of Defendants' actions may end up depending on whether the fax was sent with permission (legal) or not (illegal), and may also turn on the adequacy of the opt-out notices on the faxes in question.

 

In the case of Plaintiff 1 and the Insurer, even if the Insurer somehow failed to establish his consent, it is unclear what kind of pre-existing arrangements may have existed between the Insurer and other recipients, and the question of what suffices as consent likely varied from recipient to recipient. 

 

Here, Plaintiff 1 admitted he had a pre-existing relationship with Insurer, and expressly agreed it could communicate with him by fax.  The Insurer did so, and provided an "opt-out" number on its faxes. 

 

However, even if this failed to establish his consent, as Plaintiff 1 argued, the Seventh Circuit noted that it is unclear what kind of pre-existing arrangements may have existed between the Insurer and other fax recipients of the proposed class, and an analysis of same requires individual scrutiny.  See Howland v. First Am. Title Ins. Co., 672 F.3d 525, 534 (7th Cir. 2012) (holding that a "transaction-specific inquiry prevents class treatment").  Cf. Blow v. Bijora, Inc., 855 F.3d 793, 804–06 (7th Cir. 2017) (excluding from summary judgment potential class members "who provided no consent at all or whose consent was more limited"); see also Howland v. First Am. Title Ins. Co., 672 F.3d 525, 534 (7th Cir. 2012) (holding that a "transaction-specific inquiry prevents class treatment").

 

The Seventh Circuit also considered that while the D.C. Circuit's vacation of the Anda Order may have called into doubt the legal underpinnings of the Orders retroactively waiving Defendants' compliance with the Solicited Fax Rule on faxes sent before April 30, 2015, it did not disrupt these Orders. 

 

Although this might indicate that a common question on the effect of the waivers that affects all class members exists, the Seventh Circuit held that the trial courts were within their rights to conclude that there are enough other problems with class treatment here that a class action is not a superior mechanism for adjudicating these cases. See Parko v. Shell Oil Co., 739 F.3d 1083, 1085 (7th Cir. 2014).

 

The final questions before the Seventh Circuit were whether the waivers affected the availability of a private right of action and whether it is better handled through individual litigation or a class.  Noting that the alleged violation of the Statutory Fax Rule is regulatory, and the TCPA itself does not require opt-out notice on solicited faxes, the Seventh Circuit concluded that the rule is subject to the general rule regarding "suspension, amendment, or waiver of rules," which provides, in relevant part, that "[a]ny provision of the rules may be waived by the Commission on its own motion or on petition if good cause therefor is shown." See 47 C.F.R. § 1.3.  Thus, even if the waivers were deemed invalid, issues concerning solicitation, permission, pre-existing relationships, and the like, would remain as obstacles to class treatment.

 

The Seventh Circuit noted that some potential class members may still have valid causes of action for TCPA violations, as they may not have had pre-existing contractual arrangements, provided consent to receive the faxes, or the senders of the faxes may not have received waivers of the Solicited Fax Rule from the FCC or the waivers might be flawed. 

 

Although these individuals may still pursue claims going forward, and may still go forward, because the trial courts were within their rights to conclude that there are enough other problems with class treatment here -- i.e., that a class action is not a superior mechanism for adjudicating these cases -- and did not abuse their discretion, the orders denying class certification were affirmed.

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
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