Friday, January 20, 2012

FYI: US Sup Ct Holds TCPA Allows Federal-Question Jurisdiction

The United States Supreme Court recently held that the federal Telephone Consumer Protection Act does not deprive federal courts of federal-question jurisdiction over private actions arising under the TCPA, and that state courts have concurrent jurisdiction over private TCPA actions
 
A copy of the opinion is available at:
 
Plaintiff-petitioner Mims ("Mims") filed a law suit in a federal district court seeking damages and declaratory and injunctive relief for alleged violations of the federal Telephone Consumer Protection Act, 47 U.S.C. § 227 ("TCPA"), by a debt collection agency ("Debt Collector").  Mims's complaint alleged that the Debt Collector, in seeking to collect on a debt Mims owed, violated the TCPA by repeatedly placing automated calls to Mims's cellular phone without his consent. 
 
In bringing his suit in the federal district court, Mims asserted "federal question" jurisdiction under 28 U.S.C. §1331.  The District Court dismissed Mims's complaint for lack of subject-matter jurisdiction, ruling that the TCPA vested jurisdiction for private actions under the TCPA exclusively in state courts.  The Eleventh Circuit affirmed.  In a unanimous opinion, the Supreme Court reversed.
 
As you may recall, the TCPA bans certain purportedly intrusive telephone calls without the consent of the called party.  The TCPA also establishes a federal oversight structure and authorizes individual states to bring civil actions to enjoin prohibited practices and to collect damages.  Although the TCPA specifically requires state-initiated actions to be brought in federal court, the TCPA provides that private parties "may seek redress for violations of the [TCPA] . . .  in an appropriate [state] court" if state law permits such law suits.  See 47 U.S.C. §§227(b)(3), (c)(5), (g)(2).
 
Noting the complementary state and federal enforcement mechanisms created by the TCPA, the Supreme Court rejected the Debt Collector's various arguments that the federal court did not have subject matter jurisdiction, including the contentions that state courts have exclusive jurisdiction over private TCPA actions and that, because the TCPA is later and more specific than Section 1331, the TCPA trumps Section 1331's grant of federal-question jurisdiction.  
 
In so doing, the Court noted that where, as here, federal law creates the cause of action, there is a rebuttable presumption in favor of concurrent state-court jurisdiction. The Court observed that this presumption can be overcome "by an explicit statutory directive, by unmistakable implication from legislative history, or by a clear incompatibility between state-court jurisdiction and federal interests."   The Court held that nothing in the TCPA's grant of state-court jurisdiction deprives a federal court of federal-question jurisdiction, and further noted that the TCPA lacked language expressly limiting private parties to a particular court as it specifically does for TCPA actions brought by state attorneys general. 
 
Accordingly, the Court ruled that the federal district courts have federal-question jurisdiction over private TCPA actions, and that state courts have concurrent jurisdiction over such lawsuits.
 
 


Ralph T. Wutscher
McGinnis Tessitore 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@mtwllp.com
 

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Wednesday, January 18, 2012

FYI: 2nd Cir Holds State-Law Inaccurate Furnishing Claim Preempted by FCRA

The U.S. Court of Appeals for the Second Circuit recently held that a borrower's state law claims that a bank knowingly furnished false information to a consumer credit reporting agency were preempted by the federal Fair Credit Reporting Act.  A copy of the opinion is attached. 
 
A borrower sued his lender (the "bank"), alleging various state common law tort claims in connection with his contention that the bank provided false information to a credit reporting agency. 
 
The bank removed the suit to federal court, and then moved for dismissal on the grounds that the borrower's claims were preempted by the federal Fair Credit Reporting Act ("FCRA").  The lower court agreed, and granted the bank's motion.  The borrower appealed. 
 
As you may recall, the FCRA provides, among other things, that states may not impose any prohibition or requirement with respect to any subject matter regulated under Section 1681s-2 of the FCRA.  See 15 U.S.C. 1681t(b)(1)(F). 
 
The borrower did not dispute that his allegations fell under Section 1681s-2; however, he argued that Section 1681h(e) of the FCRA explicitly permitted his suit. 
 
Section 1681h(e) provides that consumers generally may not bring actions against those who report information to credit reporting agencies, "except as to false information furnished with malice or willful intent to injure such consumer."  15 U.S.C. Sec. 1681h(e). 
 
Based on the conflict the borrower perceived between the above-referenced FCRA provisions, he argued that the Court should hold that s. 1681t(b)(1)(F) preempts only actions based on state statutes, and not on actions based on state common laws. 
 
The Second Circuit disagreed, reasoning that the two provisions of the FCRA do not conflict.  In the Court's view, although s. 1681h(e) does not preempt a narrow class of claims relating to reports of information to credit agencies, it also does not prohibit s. 1681t(b)(1)(F) from preempting those claims. 
 
The Second Circuit also noted that, as s.1681t(b)(1)(F) was enacted after s. 1681h(e), reading an earlier-enacted statute to defeat a later-enacted statute would "contradict fundamental norms of statutory interpretation." 
 
Accordingly, the Second Circuit held that the borrower's state law claims were preempted by the plain language of s. 1681t(b)(1)(F), and therefore it affirmed the judgment of the lower court. 
 



Ralph T. Wutscher
McGinnis Tessitore 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@mtwllp.com
 

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FYI: 9th Cir Vacates Class Cert Ruling in Multi-Jurisdictional Action

The U.S. Court of Appeals for the Ninth Circuit recently held that a lower court abused its discretion in certifying a class that included consumers from 44 different jurisdictions, reasoning that the laws of those jurisdictions materially differed as to the issue at hand, and therefore that common issues of law did not predominate among the class. 
 
A copy of the opinion is available at:
 
A car manufacturer ("Manufacturer") advertised and sold cars equipped with a Collision Mitigation Braking System ("CMBS") which was designed to prevent or mitigate automobile accidents.  Several plaintiffs filed a class action complaint against Manufacturer, alleging violations of various California statutes based on the claim that Manufacturer supposedly misrepresented and concealed material information in its marketing of the CMBS. 
 
The lower court granted the plaintiffs' motion for class certification, as to a nationwide class of consumers who purchased or leased vehicles equipped with the CMBS.  Manufacturer appealed. 
 
As you may recall, Federal Rule of Civil Procedure 23(b)(3) provides that a putative class-action plaintiff must show that "the questions of law or fact common to class members predominate over any questions affecting only individual members." 
 
On appeal, Manufacturer argued that common issues of law did not predominate, because the California statutes relied upon by the plaintiffs should not be applied to a class consisting of members of 44 jurisdictions.  It further argued that common issues of fact did not predominate, because the lower court improperly assumed that all putative class members viewed Manufacturer's allegedly misleading marketing campaigns. 
 
The Ninth Circuit held that the lower court "abused its discretion in certifying a class under California law that contained class members who purchased or leased their car in different jurisdictions with materially different consumer protection laws." 
 
The Ninth Circuit based its holding on the fact that California law materially differed from the laws of the other jurisdictions where putative class members reside. Specifically, the California laws at issue here lacked scienter requirements, whereas many other jurisdictions do require scienter.  Further, the Court noted that foreign states have a "strong interest in the application of their laws to transactions between their citizens and corporations doing business within their state," whereas California's interest in applying its law to residents of foreign states was "attenuated." 
 
Therefore, the Ninth Circuit held that "each class member's consumer protection claim should be governed by the consumer protection laws of the jurisdiction in which the transaction took place," and therefore vacated the lower court's class certification order. 
 
The Court also examined whether common issues of fact predominated over questions affecting only individual members.  Here, the Court again agreed with Manufacturer's contention that they did not. 
 
The Court relied on the fact that the complained-of advertising campaigns took place only on a "small scale," which did not support a presumption that the entire putative class had relied on those campaigns.  Therefore, the Ninth Circuit stated that "the relevant class must be defined in such a way as to include only members who were exposed to advertising that is alleged to be materially misleading." 
 
Accordingly, it held that the lower court's class certification was overbroad, and vacated the same on the grounds that common questions of fact do not predominate. 
 



Ralph T. Wutscher
McGinnis Tessitore 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@mtwllp.com
 

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Monday, January 16, 2012

FYI: 4th Cir Holds Rule 68 Offer of Judgment Did Not Moot FDCPA Plaintiff's Claim

The U.S. Court of Appeals for the Fourth Circuit recently held that a Rule 68 offer did not moot an action against a debt collector, because the debt collector's offer was conditional and the amount of damages suffered by the plaintiff was uncertain.
 
A copy of the opinion is available at:
 
Defendant-appellee, a law firm ("law firm") attempted to collect a debt on behalf of a lender.  Plaintiff-appellant borrower (the "borrower") received a telephone message from an employee of the law firm, wherein the caller did not identify the law firm as a debt collector.  The borrower requested validation of the debt, and informed the law firm in writing that she was represented by counsel.  Subsequent to that notice, the law firm contacted the borrower directly, in writing. 
 
The borrower then sued the law firm, alleging several violations of the federal Fair Debt Collection Practices Act ("FDCPA").  The law firm filed a timely offer of judgment pursuant to Federal Rule of Civil Procedure 68 ("Rule 68").  That offer included statutory damages, costs, attorney's fees and actual damages "in the amount of $250.00, or an amount determined by the Court upon Plaintiff's submission of affidavits or other evidence of actual damage." 
 
When the borrower did not accept that offer, the law firm moved to dismiss the borrower's complaint on the grounds that it was moot, and on the grounds that the borrower alleged only "minor technical violations" which resulted from the law firm's "bona fide error." 
 
The lower court granted the law firm's motion to dismiss on the grounds that the borrower did not allege a material violation of the FDCPA, and did not establish that the law firm "knowingly and willfully" violated the same.  The borrower appealed. 
 
As you may recall, when a defendant unequivocally offers a plaintiff all of the relief sought by that plaintiff, the offer renders the action moot.  See, e.g., Obrien v. Ed Donnelly Enters., Inc., 575 F.3d 567, 575 (6th Cir. 2009).  On appeal, the Fourth Circuit began by considering whether the action was moot, due to the law firm's Rule 68 offer.  The Court concluded that it was not, due to several shortcomings of that offer. 
 
Specifically, because the lower court did not hold any evidentiary hearings on the amount of actual damages suffered by the borrower, the Fourth Circuit stated that it could not hold that "borrower could not possibly recover more than $250 if the case proceeded to a jury trial."  Therefore, with the amount of actual damages suffered by the plaintiff uncertain, the Fourth Circuit held that the law firm's offer of $250 did not moot the action. 
 
The Fourth Circuit also found fault with the offer to base the amount of actual damages on a determination by the lower court.  The Court noted that extensive case law provides that, to moot an action, a Rule 68 offer must be "unconditional" and "unequivocal."  Here, however, the Fourth Circuit held that the Rule 68 offer was conditioned on what the lower court might or might not do. 
 
The Fourth Circuit also emphasized that the Federal Rules of Civil Procedure entitled the borrower to the right to have a jury determine her statutory damages.  It noted, however, that if it accepted the law firm's Rule 68 offer, a "savvy defendant" could "avoid submitting the contested issue of actual damages to a jury by offering to substitute the district court as a fact finder." 
 
Consequently, the Fourth Circuit held that the law firm's Rule 68 offer did not moot the borrower's action. 
 
Next, the Court considered whether the lower court properly dismissed the borrower's complaint.  It began by examining the borrower's allegations 15 U.S.C. 1692e(11), noting that that section requires debt collectors "to disclose...that the communication is from a debt collector."  The borrower also alleged a violation of section 1692c(a)(2), which prohibits a debt collector from "communicat[ing] with a consumer in connection with the collection of any debt . . . if the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney's name and address."
 
The Fourth Circuit observed that the "material misrepresentation" requirement relied on by the lower court applies to actions based on "false representations," but not to actions based on a debt collector's failure to disclose its status.  Therefore, the Fourth Circuit held that the lower court erred in holding that the borrower failed to allege a violation of section 1692e(11). 
 
Finally, the Court considered the borrower's allegations that the law firm contacted her directly, after having been informed that she was represented by counsel.  Noting that the FDCPA prohibits communicating with a borrower if the debt collector knows that borrower is represented by counsel, the Fourth Circuit again held that the district court erred in holding that the borrower failed to allege a violation of section 1692c(a)(2). 
 
Therefore, the Fourth Circuit reversed the judgment of the lower court.



Ralph T. Wutscher
McGinnis Tessitore 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@mtwllp.com
 

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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