Saturday, July 2, 2022

FYI: 9th Cir Holds Bank's Automated Reply Text Messages Did Not Violate TCPA

The U.S. Court of Appeals for the Ninth Circuit recently affirmed a trial court's grant of summary judgment in favor of the defendant bank in an action brought under the federal Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. § 227.

 

In so ruling, the Ninth Circuit held that messages sent by the plaintiff consumer's phone to the bank's "short code" number provided the required prior express consent for the bank's responsive messages.

 

The Court also affirmed the trial court's award of "costs" under Federal Rule of Civil Procedure 41(d), but reversed the trial court's award of attorney's fees as "costs" under Rule 41(d) as a matter of right.

 

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

 

The consumer filed a putative class action suit against the defendant bank, in which he claimed that the bank sent text messages to his mobile phone without the prior express consent required by the TCPA.

 

The consumer was not a customer of the bank during the relevant period. During that time, however, the consumer's mobile phone sent 11 text messages to the bank's short code number. A short code is a short telephone number a business can use to send and receive text messages.

 

Ten of the text messages were unrelated to the bank or its services, and the bank replied with the first responsive text option. The remaining text message from the consumer to the bank consisted of the word "STOP," to which the bank replied with the second responsive text option. These reply texts were the only text messages the bank sent to the consumer's mobile phone.

 

The trial court granted summary judgment in favor of the bank, concluding that each text message from the consumer's mobile phone constituted prior express consent for each of the bank's reply texts.

 

The trial court also granted the bank's motion for an award of "costs" under Fed. R. Civ. Pro. Rule 41(d) which the bank incurred in defending identical litigation commenced by the consumer in a separate federal district court, in which the consumer entered a voluntary dismissal and the other court dismissed the case "without costs to any party."

 

Finally, the trial court decided "costs" under Rule 41(d) included the attorney's fees incurred by the bank in defending the other litigation and therefore included such attorney's fees in the award of "costs."

 

The consumer timely appealed both the trial court's grant of summary judgment in favor of the bank on his TCPA claim and its inclusion of attorney's fees as part of its Rule 41(d) award of "costs" to the bank.

 

As you may recall, the TCPA prohibits making calls to any cellular number by using a system that dials telephone calls automatically or by using an "artificial or prerecorded voice'" unless the caller received "prior express consent" from the recipient. 47 U.S.C. § 227(b).

 

The TCPA does not define prior express consent. However, in Van Patten v. Vertical Fitness Grp., LLC, the Ninth Circuit adopted the FCC's interpretation of the statute: that a person who knowingly releases his number consents to be called at that number for informational purposes, and that consent is "effective" where the responsive messages relate to the same subject or type of transaction as the messages that led to the response. 847 F.3d 1037, 1044-45 (9th Cir. 2017); In re Rules & Regulations Implementing the Telephone Consumer Protection Act of 1991, 7 F.C.C. Rcd. 8752, 8769 (Oct. 16, 1992).

 

The consumer argued that the Ninth Circuit has discretion to refuse to employ the FCC's order interpreting "prior express consent." However, the Ninth Circuit noted that Van Patten is a published opinion and binding precedent. See Miller v. Gammie, 335 F.3d 889, 900 (9th Cir. 2003) (en banc) (holding a published opinion may be overruled by a three-judge panel only when it is clearly irreconcilable with an intervening higher authority).

 

Further, the Ninth Circuit found that Van Patten's reasoning -- i.e., that providing a telephone number to a business as part of telephone communication to that business constitutes express consent to a responsive contact from that business within the scope of that communication - was applicable to the facts here. The consumer initiated contact with the bank, and the bank automatically replied to each contact with a single responsive text message to confirm receipt, provide information that the short code belonged to the bank, and explain how to stop or continue communication.

 

The Ninth Circuit held that, by sending text messages to the bank's short code, the consumer expressly consented to receiving reply text messages. Each informative and confirmatory reply text message from the bank fell within the scope of the consumer's text message initiating contact, and, therefore, "the scope of [the consumer's] consent to contact." Id. at 1046.

 

Therefore, the Ninth Circuit held that the trial court did not err in applying Van Patten and granting summary judgment in favor of the bank.

 

The Ninth Circuit then addressed the consumer's argument that the trial court abused its discretion by including attorney's fees in its award of "costs" to the bank under Fed. R. Civ. Pro. Rule 41(d).

 

Rule 41(d) allows a court to award "costs" incurred in litigation to a party if the plaintiff dismissed that litigation and then filed another suit based on the same claims, against the same defendant. The Ninth Circuit had not previously decided whether attorney's fees are available under Rule 41(d) as part of "costs."

 

Here, the Ninth Circuit held that Rule 41(d) "costs" do not include attorney's fees as a matter of right, and thus reversed the trial court's award of attorney's fees in favor of the bank under Rule 41(d). In so holding, the Court announced that it is joining every other Circuit that has meaningfully considered this issue through published opinions. See Horowitz v. 148 S. Emerson Assocs. LLC, 888 F.3d 13, 25 (2d Cir. 2018); see also Garza v. Citigroup Inc., 881 F.3d 277, 283-284 (3rd Cir. 2018); see also Andrews v. Am.'s Living Ctrs., LLC, 827 F.3d 306, 311 (4th Cir. 2016); see also Portillo v. Cunningham, 872 F.3d 728, 739 (5th Cir. 2017); see also Rogers v. Wal- Mart Stores, Inc., 230 F. 3d 868, 874 (6th Cir. 2000), cert. denied, 532 U.S. 953 (2001).

 

Agreeing with the rulings of the other Circuits, the Ninth Circuit concluded that "costs" is a term which has a long-standing definition that does not inherently include attorney's fees, and nothing in the text of Rule 41(d) compels a contrary reading of this well-understood term.

 

However, the Ninth Circuit did not decide whether attorney's fees are available under Rule 41(d) if the underlying statute so provides. This is because the Court determined that it is undisputed that the TCPA does not provide for the award of attorney's fees to the prevailing party.

 

Accordingly, the Ninth Circuit held that the trial court correctly granted summary judgment in favor of the bank, but abused its discretion in including attorney's fees in its award of "costs" under Rule 41(d).

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th 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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Wednesday, June 29, 2022

FYI: CFPB Issues Advisory Opinion on "Convenience" or "Speed Pay" Fees

The federal Consumer Financial Protection Bureau (CFPB) today issued an Advisory Opinion on "convenience" or "speed pay" fees, such as "fees imposed for making a payment online or by phone", under the federal Fair Debt Collection Practices Act (FDCPA).

 

The full Advisory Opinion is available at:  Link to Advisory Opinion

 

Among other things, the CFPB says:

 

  • Such "convenience" or "speed pay" fees violate the FDCPA, unless the fees are "expressly authorized by the agreement creating the debt or permitted by law"

 

  • This includes situations in which "a third-party payment processor collects a pay-to-pay fee from a consumer and remits to the debt collector any amount in connection with that fee, whether in installments or in a lump sum"

 

  • Silence in the law is not authorization

 

Of note, it is possible that regulators or litigants could attempt to impose this Advisory Opinion through state laws on creditors who are not otherwise subject to the FDCPA.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th 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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Sunday, June 26, 2022

FYI: 6th Cir Holds "Objectively Baseless" Debt Collection Lawsuit Violated FDCPA

The U.S. Court of Appeals for the Sixth Circuit recently ruled that a debt collector violated the federal Fair Debt Collection Practices Act (FDCPA) when it sued a debtor's wife to recover her husband's legal fees under Ohio's Necessaries Statute.

 

In so ruling, the Sixth Circuit held that:

 

(a) the debt collection lawsuit brought first against the debtor's wife violated Ohio Supreme Court precedent, and therefore was objectively baseless; and

 

(b) bringing a claim against a party under circumstances where the state supreme court has explicitly held the party cannot be held liable is a violation of the FDCPA.

 

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

 

Prior to the litigation giving rise to the appeal, the defendant debt collector (Debt Collector) filed a debt collection action against the plaintiff spouse (Spouse) and her husband (Debtor) seeking to recover unpaid attorney's fees owed by Debtor.

 

Debt Collector asserted a "spousal obligation to support" claim against Spouse pursuant to Ohio's Necessaries Statute which permits the collection of certain debts from one spouse that were incurred by the other.

 

Spouse filed a lawsuit alleging violations of the FDCPA, arguing that Creditor's lawsuit against her for legal fees incurred by Debtor was "objectively baseless."  The parties filed cross-motions for summary judgment and the trial court resolved the motions in favor of Debt Collector.  The Spouse appealed.

 

As you may recall, under the FDCPA, "[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt."  15 U.S.C. §1692e.  A violation of the FDCPA occurs when the debt collector's action or representation is materially misleading or false. Wallace v.  Wash.  Mut.  Bank,  F.A.,  683  F.3d  323,  326–27  (6th  Cir.  2012), and has the purpose of inducing payment by the debtor. Grden v. Leikin Ingber & Winters PC, 643 F.3d 169, 173 (6th Cir. 2011).

 

The Sixth Circuit noted that advancing a debt collection claim that is ultimately unsuccessful does not, in and of itself, rise to an FDCPA violation. Heintz v. Jenkins, 514 U.S. 291, 296 (1995). However, a litigation filing containing a material misstatement of state law that is "false, deceptive, or misleading" at the time it is made can constitute an FDCPA violation. Van Hoven v. Buckles & Buckles, P.L.C., 947 F.3d 889, 893-94 (6th Cir. 2020) (quoting 15 U.S.C. § 1692e).

 

The Sixth Circuit distinguished between what constitutes a non-winning debt collection claim that violates the FDCPA and one that does not. "A lawyer does not 'misrepresent' the law by advancing a reasonable legal position later proved wrong." Id. at 896. However, if the "legal contention was objectively baseless at the time it was made", it is "legally indefensible and groundless in law" and violates the FDCPA. Id.

 

The Sixth Circuit noted that the Ohio Necessaries Statute provides that a "married person must support the person's self and spouse," and if one is "unable to do so, the spouse of the married person must assist in the support so far as the spouse is able." Ohio Rev. Code § 3103.03(A).

 

The parties and the trial court focused on whether attorneys' fees constituted "necessaries" under the statute. The trial court found that Debt Collector's claim was "at the very least, arguable" as the Supreme Court of Ohio has held that certain attorneys' fees' are recoverable against a spouse. See Wolf v. Friedman, 253 N.E.2d 761, 765-67 (Ohio 1969); Blum v. Blum, 223 N.E.2d 819, 820-21 (Ohio 1967).

 

However, the Sixth Circuit held that the issue of whether attorneys' fees are included under the Ohio Necessaries Statute as irrelevant, as Debt Collector's lawsuit failed to comply with the statute's threshold procedural requirements.

In an earlier case, the Ohio Supreme Court held that "each married person retains primary responsibility for supporting himself or herself from his or her own income or property," and a "nondebtor spouse becomes liable only if the debtor spouse does not have the assets to pay for his or her necessaries." Embassy Healthcare v. Bell, 122 N.E.3d 117, 121 (Ohio 2018). Thus, the Sixth Circuit noted, Embassy Healthcare requires a creditor to first exhaust its debt collection efforts against the debtor before it can attempt to collect from the spouse.

 

Specifically, the Ohio Supreme Court held in Embassy Health that "[a] creditor must…first seek satisfaction of its claim from the assets of the spouse who incurred the debt. [The Ohio Necessaries Statute] does not impose joint liability on a married person for the debts of his or her spouse." Id.

 

The Sixth Circuit found the ruling in Embassy Health established that the debt collection lawsuit brought first against Spouse was objectively baseless. The Court further held that bringing a claim against a party under circumstances where the state supreme court has explicitly held the party cannot be held liable is a violation of the FDCPA.

 

Thus, the Sixth Circuit reversed the trial court's judgment, and remanded with instructions to enter judgment in favor of Spouse.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th 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   |   Illinois   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Tennessee   |   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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