The U.S. Court of Appeals for the Eleventh Circuit recently reversed entry of summary judgment in favor of a satellite television provider against a consumer on claims that it violated the Florida Consumer Collection Practices Act, Fla. Stat. § 559.55 et seq. ("FCCPA"), by attempting to collect a debt it knew had been discharged in bankruptcy and directly contacting the plaintiff consumer knowing she was represented by counsel.
However, the Eleventh Circuit also affirmed summary judgment in the provider's favor on the consumer's claims that it violated the federal Telephone Consumer Protection Act, 47 U.S.C. § 227, et seq. ("TCPA"), by contacting the plaintiff consumer via an automated dialing system after she revoked her consent to receive such calls.
The Eleventh Circuit determined that the debt at issue, though not listed on the consumer plaintiff's bankruptcy schedules, was in fact discharged, because it arose from a services agreement that was deemed rejected deemed rejected as a matter of law under the Bankruptcy Code, and any prepetition breach of contract claim the provider maintained for the debt was discharged when the bankruptcy court entered the discharge order. Thus, the Court held, the satellite provider attempted to collect debt it had no legal right to collect because the debt had been discharged in bankruptcy, and directly contacted plaintiff after having received notice that she was represented by counsel, in violation of the FCCPA. The Court remanded to consider whether the provider possessed requisite actual knowledge that the charges were invalid and the consumer was represented by counsel and any potential bona fide error defense.
The Court affirmed the entry of judgment in the provider's favor on the consumer's TCPA claims, holding that the TCPA does not allow unilateral revocation of consent given in a bargained-for contract, and agreeing with the Second Circuit's reasoning on the same issue in Reyes v. Lincoln Auto. Fin. Servs., 861 F.3d 51, 56 (2nd Cir. 2017).
A copy of the opinion is available at: Link to Opinion
A consumer ("Consumer") entered into a 24-month contract with a satellite television provider (the "Satellite Provider") for services (the "Agreement"). The Agreement called for monthly payments and an option to participate in the "Pause Program" which allowed customers to temporarily suspend their satellite services and the charges for those services, for up to nine months during the term of the Agreement for a monthly fee that would also extend the term of the 24-month commitment by the amount of time the service was suspended. Under the Agreement, the Consumer expressly authorized the Satellite Provider "to contact [her] regarding [her].. account or to recover any unpaid portion of [her] obligation to [the Satellite Provider], through an automated or predictive dialing system or prerecorded messaging system" on her cell phone.
Eleven months into the contract, the Consumer entered the Pause Program, and approximately two months later, filed a Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the Middle District of Florida. The Consumer listed her Satellite Provider account and amount of $831.74 on Schedule F, the schedule requiring petitioners to list outstanding debt to unsecured creditors, but did not list the Agreement on Schedule G, the schedule requiring petitioners to list all executory contracts and unexpired leases of real or personal property.
The amounts listed on Schedule F were discharged by the bankruptcy court, and written off by the Satellite Provider, but the Satellite Provider continued to charge the Consumer $5 per month for the Pause Program, which the Consumer did not pay.
Over a month after the Consumer's debts were discharged, the Satellite Provider sent an email directly to the Consumer to collect the Pause Program fees. In response, her counsel sent the Satellite Provider three faxes instructing that they represented the Consumer with regard to her debts, including any debt owed under the Agreement, and also expressly stating that "[t]o the extent any such prior express consent existed, if any, to call the above person using an [automatic telephone dialing system] (ATDS), such consent is hereby forever revoked consistent with the Florida and federal law."
Subsequently, the Satellite Provider sent four more emails directly to the Consumer seeking payment of the monthly Pause charges and placed six automated calls to the Consumer's cell phone after receiving the first fax. In response, the Consumer's attorneys twice re-sent the same facsimile.
The Consumer filed suit in federal court alleging violations of the FCCPA for purportedly continuing to contact her directly knowing she was represented by counsel about a debt it knew had been discharged in bankruptcy and the TCPA by using an ATDS or prerecorded voice to call the Consumer on her cell phone after Consumer revoked her consent to receive such calls.
The Satellite Provider moved for summary judgment, which was granted in its favor on all claims.
The trial court reasoned that the Consumer's FCCPA claims failed because the debt for services under the Agreement and the Pause Program were two separate debts, the latter of which was not listed on the Consumer's Schedule G of her bankruptcy schedules and not discharged in the bankruptcy. Thus, the Satellite Provider did not attempt to collect an illegitimate in debt in violation subsection § 559.72(9) of the FCCPA because its conduct was related only to the Pause Program debt that was not discharged, and did not violate subsection § 559.72(18)'s prohibition on directly contacting a debtor it knows to be represented by counsel because the communications from the Consumer's attorneys to the Satellite Providers stated that they represented her concerning the discharged services debt. The trial court further rejected the Consumer's TCPA claims because the TCPA does not authorize unilateral revocation of consent to receive automated calls when such consent is given in a bargained-for contractual provision.
This appeal followed.
On appeal, the Eleventh Circuit first examined the effect of the bankruptcy, and whether the trial court erred in finding the Pause Program debt was not discharged.
The Eleventh Circuit noted that the Satellite Provider's claim for the Pause debt was derived from the Agreement, which specifies the terms of the program and its fee for participation. The parties do not dispute the district court's characterization of the Agreement as an executory contract, governed by Section 365 of the Bankruptcy Code. As you may recall, under § 365, a trustee may assume or reject any executory contract of the debtor. In a Chapter 7 bankruptcy case, "if the trustee does not assume or reject an executory contract . . . of the debtor within 60 days after the order for relief . . . then such contract . . . is deemed rejected." Id. §365(d)(1).
Here, it was undisputed that the trustee neither assumed nor rejected the Agreement, and the trial court held that the Agreement was not deemed rejected under § 365 because the Consumer failed to disclose it as an executory contract on Schedule G. However, the Eleventh Circuit found that the failure to list the Agreement on her Schedule G did not prevent its deemed rejection because: (i) the Consumer disclosed the Satellite Provider as an unsecured creditor on Schedule F, thus providing the trustee notice of their relationship; (ii) the Satellite Provider clearly had notice of the bankruptcy and could have objected to the dischargeability of its breach of contract claim, but it did not do so, and; (iii) no evidence indicates that the Consumer intentionally concealed the Agreement. See In re the Matter of Provider Meds, LLC, 907 F.3d 845, 858 (5th Cir. 2018) ("At a minimum, the statutory presumption of rejection after sixty days is conclusive where there is no suggestion that the debtor intentionally concealed a contract from the estate's trustee.").
Because the trustee neither assumed nor rejected the Agreement, Consumer disclosed her relationship with the Satellite Provider on the petition, and no evidence indicates Consumer attempted to conceal the Agreement from the trustee, the Eleventh Circuit found that the Agreement was deemed rejected pursuant to § 365(d)(1) of the Bankruptcy Code.
As a result, the Satellite Provider maintained a prepetition breach of contract claim for the Pause Program debt as a general unsecured creditor under § 365(g), but failed to timely make any such claim before the discharge order was entered. Accordingly, the Court reasoned that Satellite Provider's claim for the Pause Program debt was discharged when the bankruptcy court entered the discharge order. 11 U.S.C. § 727(b) (a discharge in a Chapter 7 case "discharges the debtor from all debts" and "any liability on a claim" that arose or are determined to arise before the petition is filed); In re Edgeworth, 993 F.2d 51, 53 (5th Cir. 1993) ("A discharge in bankruptcy does not extinguish the debt itself, but merely releases the debtor from personal liability for the debt.").
Having determined that the Satellite Provider's claim for the Pause Program debt was, indeed discharged, the Eleventh Circuit turned to analysis of the Consumer's FCCPA and TCPA claims.
First addressing the FCCPA claims, the Appellate Court noted that the trial court's ruling in the Satellite Provider's favor was based on its threshold finding that the Pause Program debt had not been discharged in the Consumer's bankruptcy. Because the Eleventh Circuit reached a different result and determined that the Satellite Provider's claim to the Pause Program debt was discharged in bankruptcy, it agreed with the Consumer that the Satellite Provider attempted to collect debt it had no legal right to collect in violation of subsection § 559.72(9) because the debt had been discharged in bankruptcy, and directly contacted the Consumer after having received notice that she was represented by counsel in violation of § 559.72(18).
Accordingly, the entry of summary judgment in the Satellite Provider's favor on the Consumer's FCCPA claims was reversed, and remanded to the trial court to consumer whether the Satellite Provider possessed actual knowledge that the Pause Program dents were invalid and that the Consumer was represented by counsel with regards to the debt, as required to establish a claim under the FCCPA, and any defense that such errors were unintentional and the result of a bona fide error.
Next reviewing the Consumer's TCPA claims, the Eleventh Circuit noted that the parties do not dispute that the Consumer expressly consented to be contacted by a prerecorded voice or ATDS in the Agreement, and unilaterally attempted to revoke that consent via the faxes her attorneys sent to the Satellite Provider, yet the Satellite Provider continued to contact her.
Thus, the issue before the Court was whether the TCPA allows unilateral revocation of consent given in a bargained-for contract.
In granting summary judgment in the Satellite Provider's favor, the trial court followed the Second Circuit's reasoning in Reyes v. Lincoln Auto. Fin. Servs., 861 F.3d 51, 56 (2nd Cir. 2017) — the only Circuit to specifically address whether the TCPA allows a consumer to unilaterally revoke consent to receive automated calls when such consent is given as part of a bargained-for exchange.
Here, like the plaintiff in Reyes, the Consumer expressly consented to receive automated telephone calls to collect a debt as part of a bilateral agreement and expressly revoked his consent to receive such calls. Acknowledging that the TCPA is silent as to consent and "evidences no intent to deviate from common law rules defining consent," it applied common law contract rules to conclude that "the TCPA does not permit a party who agrees to be contacted as part of a bargained-for exchange to unilaterally revoke that consent," and affirmed summary judgment for the defendant. Id. at 56.
The Eleventh Circuit agreed with the Second Circuit's reasoning, noting prior interpretations of contract law, stating that "an 'agreement is a manifestation of mutual assent on the part of two or more persons,' [and thus] it is black-letter contract law that one party to an agreement cannot, without the other party's consent, unilaterally modify the agreement once it has been executed." Kuhne v. Fla. Dep't of Corrs., 745 F.3d 1091, 1096 (11th Cir. 2014) (internal citations omitted).
It further rejected the Consumer's claims that this determination is at odds with its decision in Osorio v. State Farm Bank, F.S.B., 746 F.3d 1242 (11th Cir. 2014) or the Federal Communication Commission's ("FCC") landmark 2015 Ruling, In the Matter of Rules & Regulations Implementing the Tel. Consumer Prot. Act of 1991, 30 F.C.C. Rcd. 7961, 7994-7999 (2015) (the "2015 FCC Ruling"), because neither addressed consent given in a legally binding agreement, instead addressing consent given generally and relying on common law tort principles to find that consent is revocable under the TCPA. See Osorio, 746 F.3d at 1253 (citing to RESTATEMENT (2D) OF TORTS); 2015 FCC Ruling, 30 F.C.C. Rcd. at 7994 n.223 (citing to the RESTATEMENT (2D) OF TORTS § 892A, cmt. i. (1979)).
The Eleventh Circuit was similarly unpersuaded by the Consumer's argument that unilateral revocation of consent given in a legally binding agreement is permissible because it comports with the consumer-protection purposes of the TCPA, agreeing with the Second Circuit that "[i]t was well-established at the time that Congress drafted the TCPA that consent becomes irrevocable when it is integrated into a binding contract, and we find no indication in the statute's text that Congress intended to deviate from this common-law principle in its use of the word 'consent.'" Reyes, 861 F.3d at 58.
Accordingly, summary judgment in the Satellite Provider's favor on the Consumer's TCPA claim was affirmed, and the matter was remanded to the trial court as to the reversed FCCPA claims.
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
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.
Our updates and webinar presentations are available on the internet, in searchable format, at:
Financial Services Law Updates
The Consumer Financial Services Blog™
California Finance Law Developments