FYI: 9th Cir Adopts Broad Definition of ATDS Under TCPA, Reverses Trial Court's Ruling

The U.S. Court of Appeals for the Ninth Circuit recently held that the term automatic telephone dialing system ("ATDS"), as defined by the federal Telephone Consumer Protection Act, 47 U.S.C. § 227, et seq. ("TCPA"), includes devices that store telephone numbers to be called, "whether or not those numbers have been generated by a random or sequential number generator."

 

Accordingly, the Ninth Circuit vacated the trial court's order dismissing the plaintiff's putative class action asserting violations of the TCPA.

 

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

 

In 2012, Plaintiff signed up for a gym membership with defendant gym ("Defendant").  After joining the gym, Plaintiff received three text messages from Defendant over an eleven month period, which Plaintiff's phone carrier charged him for.  In February 2014, Plaintiff filed a putative class action against Defendant alleging violations of the TCPA.  Plaintiff specifically alleged that Defendant sent text messages via an ATDS that had the "the capacity to send text messages to cellular telephone numbers from a list of telephone numbers automatically and without human intervention."

 

Defendant subsequently moved for summary judgment, which the trial court granted.  Specifically, the trial court held the system sending the text messages at issue was not an ATDS as it did not have the present or potential capacity "to store or produce telephone numbers to be called, using a random or sequential number generator."  Plaintiff timely appealed.  The Ninth Circuit vacated the submission of Plaintiff's appeal pending a decision in ACA Int'l v. FCC, 885 F.3d 687 (D.C. Cir. 2018) ("ACA").

 

As you may recall, the D.C. Circuit in ACA Int'l v. FCC vacated the FCC's interpretation of the types of devices that qualified as an ATDS leaving only the statutory definition Congress created in 1991 that defined an ATDS as "equipment which has the capacity—(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers."  47 U.S.C. § 227(a)(1).

 

The chief issue on appeal here was whether the text message sending device (the "System"), qualified as an ATDS for TCPA purposes.  The System is a web-based marketing platform designed to send promotional text messages to a list of stored telephone numbers.  The System stores phone numbers when: (1) an individual manually enters the phone numbers into the System; (2) a customer responds to a text message, which automatically provides the customer's phone number in the System; or (3) a customer provides his or her phone number by completing a consent form on the System's website.   

 

On appeal, Plaintiff argued a piece of equipment qualifies as an ATDS "if it has the capacity to store telephone numbers and then dial them."  Defendant responded by arguing that in order to qualify as an ATDS, "a device must store telephone numbers that have been produced using a random or sequential number generator."  The Ninth Circuit disagreed with both interpretations explaining that "both parties fail to make sense of the statutory language without reading additional words into the statute."  

 

After finding the definition of an ATDS ambiguous, the Ninth Circuit held that an ATDS includes devices with the capacity to call stored numbers automatically and that the definition is not limited to devices having the capacity to call numbers produced by a "random or sequential number generator." 

 

The Court found support for its interpretation of § 227(a)(1) in other TCPA provisions that allowed an ATDS to call selected numbers from a list of phone numbers as opposed to a system that simply dials a block of random or sequential phone numbers.  See e.g., 47 U.S.C. §§ 227(b)(1)(A), and (b)(1)(A)(iii). 

 

The Ninth Circuit further noted that when Congress amended certain TCPA sections after the FCC's 2015 Order, it did not amend the TCPA's definition of an ATDS.  This is even though the FCC's prior orders defined an ATDS "to include devices that could dial numbers from a stored list."  The Court concluded that Congress' decision to forgo amending the statutory definition of an ATDS meant Congress "tacitly approved" the FCC defining an ATDS to include devices with the ability to dial numbers from a stored list.  See, Lorillard v. Pons, 434 U.S. 575, 580 (1978).

 

Accordingly, the Ninth Circuit held that § 227(a)(1)'s definition an ATDS includes equipment with the capacity to: (1) store numbers to be called; or (2) produce numbers to be called, using a random or sequential number generator—and to dial such numbers.

 

The Ninth Circuit further rejected Defendant's argument that a device cannot be an ATDS unless it operates "without any human intervention whatsoever."  In rejecting this argument, the Court explained Congress clearly targeted equipment that could engage in automatic dialing as opposed to equipment "that operated without any human oversight or control."

 

Accordingly, the Ninth Circuit reversed the trial court's order granting Defendant's motion for summary judgment and remanded the matter for further proceedings. 

 

 

 

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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FYI: 11th Cir Holds HUD Regs Did Not Prevent Reverse Mortgage Foreclosure on Non-Borrower Surviving Spouse

The U.S. Court of Appeals for the Eleventh Circuit held that 12 U.S.C. § 1715z-20(j) did not alter or limit the lender's right to foreclose under the terms of the valid reverse mortgage contract where the non-borrower spouse was still living in the home.

 

Accordingly, the Eleventh Circuit affirmed the trial court's dismissal of the plaintiff's petition for injunctive relief to prevent the foreclosure sale.

 

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

 

A borrower ("Borrower") obtained a reverse mortgage that was subsequently assigned to the defendant lender ("Lender").  The mortgage was secured by the house the Borrower shared with his wife and their minor daughter, and was insured by the Department of Housing and Urban Development ("HUD").

 

The Borrower's wife was not designated a borrower in the mortgage, nor could she be, as she was not yet 62 years old at the time it was extended. 

 

After the Borrower died, the Lender asserted a right to repayment under a provision of the mortgage authorizing it to "require payment-in-full of all sums secured by this Security Instrument" if "[a] Borrower dies and the Property is not the principal residence of at least one surviving Borrower." 

 

When the loan was not repaid, the Lender initiated non-judicial foreclosure proceedings.  In response, the Borrower's wife ("Plaintiff") filed a petition in state court, individually and on behalf of the Borrower's estate and their minor daughter, seeking injunctive relief to prevent the foreclosure. 

 

Plaintiff argued that 12 U.S.C. § 1715z-20(j) prohibited the Lender from foreclosing while she lived in the home because even though she was not a "Borrower" under the terms of the mortgage contract, she was nonetheless a "homeowner" protected by the statute. 

 

As you may recall, 12 U.S.C. § 1715z-20(j) provides:

 

The Secretary may not insure a home equity conversion mortgage under this section unless such mortgage provides that the homeowner's obligation to satisfy the loan obligation is deferred until the homeowner's death, the sale of the home, or the occurrence of other events specified in regulations of the Secretary.  For purposes of this subsection, the term 'homeowner' includes the spouse of a homeowner.

 

The state-court judge granted a temporary restraining order and enjoined the foreclosure.  Thereafter, the Lender removed the case to federal court and filed a motion to dismiss.

 

The trial court granted the Lender's motion to dismiss, concluding that section 1715z-20(j) addresses only HUD's authority to insure loans and does not affect the Lender's contractual right to foreclose.  Plaintiff appealed.

 

On appeal, Plaintiff argued that the trial court's order should be reversed because it was "contrary to public policy and Congress's express intent to protect the non-borrower surviving spouse of a [r]everse [m]ortgage [b]orrower from displacement from their residential home."

 

The Eleventh Circuit disagreed. 

 

In so ruling, the Court first noted that the Lender had the right under state law to foreclose under the express terms of the mortgage contract.

 

Specifically, the mortgage authorized the sale of the property to recover the balance due if "[a] Borrower dies and the Property is not the principal residence of at least one surviving Borrower."  Although Plaintiff remained in the house following the Borrower's death, she acknowledged that she was not a "Borrower" under the mortgage contract.

 

Plaintiff next argued that notwithstanding the contract terms, section 1715z-20(j) protected her from displacement as a non-borrowing surviving "spouse" who remained in the home.  Plaintiff asserted that "Congress's clear 'intent' in enacting § 1715z-20(j) was to require lenders to defer homeowners' loan obligations beyond the homeowner's death until his spouse either dies or sells the property." 

 

Thus, the question for the Eleventh Circuit was "whether . . . federal law effectively supersedes the mortgage contract's contrary terms."

 

Initially, the Court noted that it agreed with Plaintiff "that § 1715z-20(j) reflects Congress's 'intent' to safeguard widowed spouses."  Moreover, "we can assume (without deciding) that HUD shouldn't have insured the mortgage contract at issue here because it failed to protect the widowed non-borrower from displacement following the death of her borrower spouse." 

 

However, "[w]hile Congress might have 'intend[ed]' for non-borrower spouses to enjoy protection under HUD-insured mortgages, § 1715z-20(j)'s plain language applies only to HUD and speaks only to what the Secretary can and cannot due." 

 

Further, "the mortgage contract here created and embodies an independent legal relationship between [the Lender] and [the Borrower]."  Because section 1715z-20(j) "says nothing about private contractual obligations one way or the other," it "cannot be read to alter or affect the enforceability of the mortgage contract or its terms." 

 

Thus, "even assuming that HUD insured [the Borrower's] mortgage in violation of § 1715z-20(j), [the Lender] still had a private contractual right – independent of the statute – to demand immediate payment and, if necessary, pursue foreclosure." 

 

Accordingly, the Eleventh Circuit held that the trial court properly granted the Lender's motion to dismiss.  

  

 

 

 

 

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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INVITATION: CCFL @ Ft. Worth (Nov 5-6, 2018) | 30+ In-House Counsel Attending

Please join us at the Annual Consumer Financial Services Conference organized by The Conference on Consumer Finance Law, and hosted at Texas A&M Law School.

 

We are pleased to announce that we have more than 30 in-house counsel from various companies already registered.

 

 

WHEN:  Nov. 5-6, 2018

WHERE:  Ft. Worth, TX

CLE:  12.0 CLE Credits to Be Provided, including 1.0 hr of Ethics

PRICE:  $495 before October 8, 2018

 

REGISTRATION:  http://www.ccflonline.org/conference

 

(or you can use the attached to register by mail)

 

Please circulate this Invitation to any other people -- inside or outside your firm or company -- whom you think might be interested in attending.

 

The Conference will include presentations by some of the best and brightest speakers and practitioners in the country on various topics.

 

We look forward to seeing you!

 

 

 

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   |   Indiana   |   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.

Our updates and webinar presentations are available on the internet, in searchable format, at:

 

Financial Services Law Updates

 

and

 

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and

 

Webinars

 

and

 

California Finance Law Developments

 

 

 

FYI: Fla Sup Ct Resolves Conflict on Deadline to Claim Foreclosure Surplus Funds

In a dispute over surplus funds from a judicial foreclosure property sale, the Florida Supreme Court recently held that a subordinate lienholder's claim to surplus funds — filed sixty-one days after the public auction — was timely and superior to the claim of the former record owners of the property.

 

In so ruling, the Florida Supreme Court resolved a certified conflict between Florida's Second and Fourth District Courts of Appeal by concluding that the sixty-day timeframe for filing a claim to surplus under the provisions of chapter 45, Florida Statutes, begins upon the clerk's issuance of the certificate of disbursement, and not the date of the public auction. 

 

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

 

After final judgment of foreclosure was entered against the former owners of real property (the "Former Owners"), a public auction sale date was set, and in accordance with section 45.031(1)(a), Florida Statutes, the final judgment included the requisite statement regarding a potential surplus. 

 

The public auction was held on July 2, 2015. The clerk issued the certificate of sale on July 6, 2015 and the certificate of title was issued on July 14, 2015.  The certificate of disbursements, reflecting a surplus of $86,093.27, was not issued until July 29, 2015.

 

On August 4, 2015, the holder of a subordinate third mortgage on the subject property ("Third Mortgagee") filed a claim asserting its right to $20,573.64 of the surplus amount.  On September 1, 2015, sixty-one days after the public auction, the Former Owners filed a verified claim for mortgage foreclosure surplus, acknowledging the timely claim of the Third Mortgagee, and requesting issuance of an Order disbursing $20,573.64 to the Third Mortgagee, and the remainder to themselves. 

 

On September 2, 2015, the holder of a subordinate second mortgage ("Subordinate Lienholder") filed a claim asserting its right to the entire surplus amount.  The Subordinate Lienholder's claim was filed more than sixty days after the public auction, but within sixty days of the clerk's filing of the certificates of sale, title and disbursement.

 

At a hearing on the parties' competing claims for surplus, the trial court rejected the Subordinate Lienholder's claim to the surplus as untimely under section 45.031 because it "was not submitted within 60 days of the foreclosure sale held on July 2, 2015," and directed the clerk to disburse $20,573.64 of the surplus to the Third Mortgagee, and the remainder to the Former Owners.

 

The Subordinate Lienholder appealed to the Florida District Court of Appeals for the Second District (Second District, or 2nd DCA), arguing "that a foreclosure sale is not complete until the clerk issues the certificate of sale." 

 

Focusing primarily on the language with section 45.031(7)(b) which provides the form for the clerk's certificate of disbursements and "only refers to the 'sale,' not the 'certificate of sale,' and consistent with two prior decisions of the Court, the Second DCA concluded that the statute unambiguously provided that the cutoff for submitting claims for surplus funds is sixty days from the date of the public auction.  Bank of New York Mellon v. Glenville, 215 So. 3d at 1285-1286 (Fla. 2d DCA 2017). 

 

The 2nd DCA further rejected the Subordinate Lienholder's argument that the sixty-date period should begin form the day the clerk issues the certificate of title, concluding that it waived that argument by not raising the issue prior to rehearing, but noting that it was consistent with the Florida Fourth District Court of Appeals' (Fourth District or 4th DCA) ruling in Straub v. Wells Fargo Bank, N.A., 182 So. 3d 878, 881 (Fla. 4th DCA 2016). 

 

In Straub, the Fourth District affirmed the trial court's ruling that the subordinate lienholder's claims to surplus was timely because the sixty-day period begins to run upon the issuance and filing of the certificate of title.  Straub, 182 So. 3d at 881.  Notably, the 4th DCA's opinion in Straub did not mention the clerk's issuance of the certificate of disbursements.

 

Observing conflict between the two rulings, the Second Circuit Court certified conflict with Straub, while opining that Straub's construction of the term "sale" "confuses the meaning of several subsections of section 45.031.  Straub, 182 So. 3d at 1287 (Fla. 2d DCA 2017).

 

The certified conflict issue before the Florida Supreme Court required it to construe the term "60 days after the sale," as used in section 45.031, Florida Statutes (2015). 

 

As an initial matter, Section 45.032(1)(c) defines "surplus" to mean "the funds remaining after payment of all disbursements required by the final judgment of foreclosure and shown on the certificate of disbursements."  Section 45.032(3) references a very specific sixty-day period, referenced in the following three paragraphs of the subsection, stating "[d]uring the 60 days after the clerk issues a certificate of disbursements, the clerk shall hold the surplus pending a court order."

 

The Florida Supreme Court first noted that the Second Circuit failed to take this specific sixty-day period identified in 45.032(3) in reaching its conclusion in the underlying appeal, instead focusing largely on what it considered to be a clear meaning of section 45.031(7)(b) that avoided confusing the meaning of other subsections of section 45.031. Glenville, 215 So. 3d at 1286-87. 

 

In examining the statute's plain meaning, the Supreme Court noted that the 2nd DCA's conclusion that "sale" as used in section 45.031(7)(b) referred to the public auction given the use of the term in other subsections of the statute stopped short in its consideration of relevant provisions of the statutory scheme for judicial sales.  However, looking to section 45.032 to understand the meaning of section 45.031 is proper because section 45.031, section 45.032, and several other sections of chapter 45 together comprise a statutory scheme relating to judicial foreclosure sale procedures. See Sch. Bd. of Palm Beach Cty. v. Survivors Charter Sch., Inc., 3 So. 3d 1220, 1234 (Fla. 2009).

 

It is well-established under Florida law that the term "sale" in Chapter 45 must be understood in light of the specific context in which it is used.   Allstate Mortgage Corp. of Florida v. Strasser, 286 So. 2d 201 (Fla. 1973).  Here, interpretation of the sixty-day provision of section 45.031(7)(b) in light of the sixty-day provision of section 45.032(3) is supported by the rule that "a specific statute covering a particular subject area always controls over a statute covering the same and other subjects in more general terms." McKendry v. State, 641 So. 2d 45, 46 (Fla. 1994).  Indeed, "surplus" is defined under section 45.032.

 

The Florida Supreme Court thus disagreed with the Second District and reasoned that "the sixty-day period in section 45.031(7)(b) must be understood in a way that is consistent with the sixty-day period in section 45.032(3)," and is not triggered by the public auction.   However, this reasoning also required the Supreme Court to disapprove of the Fourth District's reasoning in reaching its conclusion in Straub.

 

While acknowledging that the 4th DCA's opinion in Straub correctly determined that the sixty-day cutoff period does not begin until after the actual transfer of ownership of the property, the Supreme Court found fault in its conclusion that the sixty-day period begins upon the issuance of the certificate of title, as the certificate of disbursements may not always be issued on the same day as the certificate of title, as demonstrated in the underlying action before the 2nd DCA.  (Compare § 45.031(7)(a), Fla. Stat. requiring the clerk to file the certificate of disbursements "[o]n filing a certificate of title").

 

Accordingly, the Florida Supreme Court concluded that that the actual triggering event for filing a claim to surplus "sixty days after the sale" under the provisions of chapter 45, Florida Statutes, begins with the issuance of the certificate of disbursements. 

 

Because the Subordinate Lienholder's claim was timely filed before the expiration of that sixty-day period, the Supreme Court quashed the Second District's underling decision in Glenville, and expressly disapproved the Fourth District's reasoning of Straub as inconsistent with its reasoning here.

 

 

 

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   |   Indiana   |   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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Financial Services Law Updates

 

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and

 

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