Saturday, April 7, 2012

FYI: 4th Cir Rejects Challenge to Consumer Plaintiffs Lawyers' Solicitations Under Litigation Exception to DPPA

The U.S. Court of Appeals for the Fourth Circuit recently upheld a summary judgment ruling in favor of a group of consumer plaintiffs lawyers, holding that(1) letters sent by the lawyers to prospective consumer plaintiffs in a related lawsuit were impermissible "solicitations" under the federal Driver Privacy Protection Act; but  (2) the solicitations were so closely intertwined with, and integral to, the litigation that obtaining plaintiffs' personal identifying information was permissible as a litigation exception under the DPPA.
A copy of the opinion is available at: 
Plaintiffs-appellants ("Car Buyers") filed a putative class-action complaint against a number of attorneys ("Lawyers") under the federal Driver Privacy Protection Act of 1994 ("DPPA"), claiming that certain mailings they received from the Lawyers violated that DPPA. 
The complaint alleged that, during the course of investigating potential claims and pursuing a group-action lawsuit against various car dealerships for alleged deceptive practices in supposed violation of a South Carolina consumer protection law ("Dealers Act"), the Lawyers had sought and unlawfully obtained personal information about the Car Buyers from South Carolina's Department of Motor Vehicles ("DMV") under the state Freedom of Information Act. 
The Car Buyers alleged that the Lawyers had impermissibly obtained and used protected personal information about their car purchases, addresses, and telephone numbers for purposes of lawyer advertising and solicitation. The Car Buyers sought liquidated, compensatory and punitive damages, as well as a permanent injunction under the DPPA.
The Lawyers countered that they had obtained the Car Buyers' personal information properly under the litigation exception to the DPPA, as they were investigating additional potential claims related to the ongoing Dealers Act litigation.  Moreover, the Lawyers also asserted that because they had acted as "private attorneys general" in the Dealers Act litigation, the "state action" exception also applied to their requests for information to the DMV.
The district court granted summary judgment in favor of the Lawyers and dismissed the claims with prejudice, ruling that the Lawyers had not engaged in prohibited solicitation, but that even if they had engaged in solicitation, the Lawyers' conduct satisfied the litigation and state action exceptions to the DPPA's prohibitions and was therefore lawful.  The lower court reasoned that the Lawyers' conduct was analogous to that of a state attorney in the related Dealers Act litigation and thus constituted an "investigation in anticipation of litigation" or a permitted use "in connection with [a] civil . . . proceeding."  
The Car Buyers appealed, and the Fourth Circuit affirmed on slightly different grounds.
As you may recall, the DPPA prohibits any person from knowingly obtaining or disclosing "personal information" such as social security numbers, telephone numbers, and addresses from state DMVs "for any use not permitted" under the DPPA.  18 U.S.C. § 2722.   The DPPA in turn permits the disclosure of personal information for purposes of bulk distribution for surveys, marketing or solicitations, provided the person to whom the information pertains has given his express consent to the state.  18 U.S.C. § 2721(b)(12).  Moreover, the DPPA's "litigation exception" permits a state DMV to disclose personal information of drivers and car owners for use "in connection with" litigation, including civil or criminal actions.  18 U.S.C. §2721(b)(4).  Further, under the "state action" exception, a private person acting on behalf of a federal, state or local agency, may obtain such information from a DMV.  18 U.S.C. § 2721(b)(1).
In analyzing whether the Lawyers had engaged in "solicitation" in violation of the DPPA, the Fourth Circuit applied a "consumer-protective objective standard" and noted in part that the letters sent to the Car Buyers described the letters as "advertising material."   According to the Court, a reasonable recipient would thus understand such material to be a lawyer's solicitation for business.   
The Court further noted that the letters encouraged recipients to respond to the Lawyers to learn about their rights in the Dealers Act litigation and to "participate in the case" but made no mention that the recipients' interests may have already been represented in that group-action litigation.  Looking at the various factors, the Fourth Circuit agreed with the Car Buyers and ruled that the letters were improper solicitations under the DPPA.
However, the Fourth Circuit rejected the Car Buyers' argument that any impermissible use of personal information, such as the solicitations in this case, would automatically be a violation of the DPPA.  In so ruling, the Court adopted the persuasive reasoning of the Eleventh Circuit in Rine v. Imagitas, Inc., 590 F.3d 1215 (11 Cir. 2009), which held that overlapping provisions of the DPPA must be given effect, unless they are completely at odds, and that non-consensual solicitation inextricably intertwined with the state-action exception is not actionable.  See also Thomas  v. George, Hartz, Lundeen, Fulmer, Johnstone, King & Stevens, P.A., 525 F.3d 1107(11th Cir. 2008)(lawyer's purported prohibited solicitation was tied to  investigation in anticipation of litigation). 
Consistent with the Eleventh Circuit's reasoning, the Court agreed that full effect should be given to the permissive use protected by the litigation exception and that to hold otherwise would be an unreasonable reading of the DPPA. 
Accordingly, under the facts and circumstances in this case, the Fourth Circuit ruled that the solicitation was not actionable by the Car Buyers, because "under the pragmatic approach to the litigation exception," the Lawyers had to first engage in the solicitation in order to make appropriate use of the personal information in the Dealers Act litigation, and such use was integral to and inextricably intertwined with conduct permitted pursuant to the litigation exception. 
Finally, the Fourth Circuit also rejected the Car Buyers' assertion that the district court had engaged in procedural impropriety by taking judicial notice of the documents associated with the Dealers Act litigation that the Lawyers had attached to their pleadings.  The Court pointed out that the lower court had taken judicial notice of the materials, not for the facts asserted therein, but as evidence of the intended and actual use of the Car Buyers' personal information. 

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
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