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Justin has a primary focus in Financial Services Litigation and represents clients in federal and state court in business disputes, financial services litigation and arbitration, and class action litigation.

On March 12, Judge Eldon E. Fallon of the U.S. District Court for the Eastern District of Louisiana tossed a plaintiff’s putative class action lawsuit against the American Heart Association (“AHA”), Anthem Foundation, Inc., and Anthem, Inc. under the Telephone Consumer Protection Act relating to text messages sent to a consumer following her attendance at a CPR training course. This decision provides some additional clarity for health care companies in distinguishing between informational and telemarketing outreach under the TCPA.

The underlying facts are straightforward. The plaintiff attended a CPR training event and provided her cellular telephone number to the AHA to receive content including “monthly CPR reminders” and “healthy messaging information.” She subsequently received “more than 20 text messages” from AHA, such as “AHA/Anthem Foundation: Memorize your work address. You may need to recite it to a dispatcher should you have to call 9-1-1 from the office.” Each of the roughly two dozen text message included “AHA/Anthem Foundation” at the beginning of the message. Although the text messages generally provided health-related informational content, one text message provided a link to the AHA’s website to find available CPR courses in a specific geographic area—some of which were free, and others available for a fee.

The plaintiff’s theories of liability were that (1) the messages were telemarketing, and thus the prior express consent she provided to AHA was not sufficient for the at-issue text messages; (2) nonprofit Anthem Foundation was vicariously liable for text messages sent by AHA because “Anthem Foundation” was included in the body of the message; and (3) Anthem, Inc. was vicariously liable because the inclusion of Anthem Foundation in the text messages was a “purely commercial plug” of its corporate parent. The defendants jointly moved to dismiss the complaint, claiming that the consent provided to AHA was sufficient for the whole of the communications with the plaintiff, and submitted the entire text-message log between the plaintiff and AHA.

The lawsuit attempted to broaden the TCPA in two key ways: (1) expanding vicarious liability to brands allegedly affiliated with the communications, and (2) applying the TCPA’s prior express written consent standard for telemarketing to text messages providing information about local CPR classes—neither of which Judge Fallon was willing to indulge. On the vicarious liability point, the Court found that “although the text messages reference Anthem Foundation, this is irrelevant because the sender was, in fact, AHA.” The Court further noted the lack of any authority suggesting that “a nonprofit’s association with a donor or another charitable entity—i.e., Anthem Foundation—gives rise to a TCPA claim when she voluntarily sought to receive certain communications and information.”

As to the content of the messages, Judge Fallon examined the text message relating to CPR courses, which contained a link to a search function allowing users to find nearby classes. The Court visited the link and provided screenshots of the website in its ruling. It observed that “[t]o sign up for a CPR class—whether for-pay or free—a visitor must click on one of the providers, in which the [visitor] is taken to the provider’s Website.” The Court wrote, “[I]n this case, common sense tells the Court that the information in which Plaintiff labels as ‘commercial’ is undoubtedly informational. Defendants AHA and Anthem Foundation provide individuals with a public resource to seek CPR training. This resource is the type of communications Plaintiff wanted and signed up to receive: information about CPR and healthy living. Her complaint is thus unwarranted.”

With this dismissal and others like it, health care companies can be heartened that multiple courts have taken a “common sense” approach interpreting the TCPA to permit beneficial, health-related outreach to their members and consumers. However, this area of law remains murky, and thus companies are reminded of the importance of maintaining accurate records to minimize litigation risks.

The defendants were jointly represented by Covert J. Geary of Jones Walker LLP in New Orleans, Louisiana. Anthem Foundation, Inc. and Anthem, Inc. were also represented by Chad R. Fuller, Virginia Bell Flynn, and Justin M. Brandt of Troutman Sanders LLP.

 

On January 29, a California state court approved a $2.25 million settlement to be paid by Walgreen Co., commonly known to consumers nationwide as the drug store chain Walgreens. The settlement stems from a consumer protection lawsuit by the district attorneys of four California counties (Santa Clara, Contra Costa, San Mateo, and Santa Cruz) in and around the San Francisco Bay area relating to selling expired over-the-counter drugs, baby food, and infant formula and charging consumers more than the lowest posted or advertised price for items.

The settlement concludes a months-long investigation by state regulatory agencies and county district attorneys’ offices into Walgreens, which operates more than 600 stores in California. The state will receive the entirety of the penalty paid by Walgreens, due to the difficulty in determining which or how many customers were affected. In addition to the financial penalty, a court order requires Walgreens employees “to make quarterly patrols to remove expired items and to post ‘clear and conspicuous’ signs asking consumers to inspect expiration dates.”

The California probe is another recent example of the foray of state attorneys general and local district attorneys into the consumer protection space. Companies should be mindful that despite the lessened reach of the Consumer Financial Protection Bureau and federal regulators over the past year, state enforcement—in California, at least, extending down to local district attorneys—has increased and will likely continue to do so.

On January 3, the Ninth Circuit Court of Appeals found that Section 1748.1 of the California Civil Code – which bars sellers from imposing surcharges for credit card payments, while still permitting discounts for payment by cash or other means – was an impermissible content-based restriction under the First Amendment of the United States Constitution as specifically applied to the plaintiffs.

The plaintiffs in Italian Colors Restaurant et al. v. Becerra, No. 15-15873, 2018 WL 266332 (9th Cir. Jan. 3, 2018) were five California businesses and their owners or managers that “pay thousands of dollars annually in credit card fees.” Although it is in their interest to collect cash payments to avoid credit card fees, Section 1748.1 prevented them from imposing credit card surcharges, which they contended would be more effective than discounts to encourage buyers to use cash. Despite there being no apparent measurable difference between consumers’ response to the two approaches, research indicates that surcharges may be more effective because “economic actors are more likely to change their behavior if they are presented with a potential loss than with a potential gain.”

The Ninth Circuit deferred to the recent Supreme Court decision in Expressions Hair Design v. Schneiderman, 137 S. Ct. 1144 (2017), in which the Court held that New York’s surcharge ban tells merchants nothing about the amount they are allowed to collect from a cash or credit card payer, but does regulate how sellers may communicate their prices. The Ninth Circuit reasoned that Section 1748.1 regulates commercial speech because it regulates how sellers can communicate their prices rather than how much sellers can charge. As a result, the restriction implicated the First Amendment. The Court conducted a two-prong intermediate scrutiny test, finding that: (1) the regulated speech (namely, imposing credit card surcharges) was not misleading or related to unlawful activity; and (2) the law did not further the state’s interest in protecting consumers from deceptive price increases and was not narrowly tailored to achieve the state’s interest.

For these reasons, the Court found the law violated the First Amendment only as applied to the plaintiffs, with respect to the specific pricing practice that the plaintiffs wanted to use. This ruling is the latest in a series of other appellate decisions analyzing state law surcharge bans under the First Amendment, indicating that such restrictions may continue to be challenged in court.

On November 21, the United States District Court for the Northern District of Illinois granted preliminary approval of a proposed $600,000 settlement of a class action lawsuit filed by a consumer against M3 Financial Services, Inc., an Illinois-based health care debt collector. The lawsuit, styled Elaine Mason et al. v. M3 Financial Services Inc., alleged that M3 placed more than one million calls to cellular telephones without prior express consent in violation of the Telephone Consumer Protection Act.

Originally filed on May 12, 2015, the lawsuit alleged that M3, in its attempts to contact debtors, placed autodialed and prerecorded calls that were instead received by individuals who were not debtors. The proposed class is based on 19,385 unique cell phone numbers contacted between May 2011 and May 2016 that did not belong to a debtor or guarantor on the underlying account for which a call was placed. This represents approximately one-fourth of the cell phone numbers called by M3 during the time period at issue.

The proposed settlement, which requires private mediation and considerable subsequent negotiations, provides for a fund of $600,000 from which will be paid class members as well as attorneys’ fees and costs and administration costs.

Troutman Sanders LLP has unique industry-leading expertise with TCPA compliance, with experience gained trying TCPA cases to verdict and advising Fortune 50 companies regarding their compliance strategies. We will continue to monitor regulatory and judicial interpretation of the TCPA to identify and advise on potential risks.

A Texas-based payment processor agreed on November 1 to pay $9 million to settle a putative class action brought under the Telephone Consumer Protection Act in the United States District Court for the Northern District of California.  According to the plaintiffs, Pivotal Payments, Inc. failed to ensure that a third party it hired to make marketing calls on its behalf complied with the TCPA, which prohibits telemarketing calls to cellular telephone numbers without call recipients’ prior express written consent.

Pivotal Payments allegedly included a provision in its contract with the marketing firm that mandated TCPA compliance.  However, the marketing firm allegedly violated the contract by calling cell phone numbers without first obtaining the recipients’ prior express consent.  Although Pivotal Payments initially filed a third-party complaint against the marketing firm seeking indemnification, it voluntarily dismissed such claims less than a month later.

After more than a year of discovery, Pivotal Payments and the putative class agreed to settlement terms for a class of over 1.9 million members.  Pivotal Payments agreed to pay $9 million to settle the TCPA claims.  Class members are each expected to receive between $20 and $60.  The settlement fund will also pay for an incentive award to the named plaintiff ($25,000), settlement administration costs (approximately $50,000), and class-action attorneys’ fees and costs (approximately $2.25 million).

It is also important to note that the District of Columbia Circuit Court of Appeals has the potential in the near future to upend litigation under the TCPA, one of the nation’s most frequently litigated statutes, as it considers the legality of the FCC’s 2015 Declaratory Ruling and Order that greatly expanded the statute’s purview. With oral argument completed in October 2016, a decision is likely imminent.

Troutman Sanders LLP has unique industry-leading expertise with TCPA compliance, with experience gained trying TCPA cases to verdict and advising Fortune 50 companies regarding their compliance strategies.  We will continue to monitor regulatory and judicial interpretation of the TCPA to identify and advise on potential risks.

In Hinderstein v. Advanced Call Ctr. Techs., No. 15-100017 (C.D. Cal. Feb. 27, 2017), a case alleging violation of the federal Fair Debt Collection Practices Act and California’s Rosenthal Fair Debt Collection Practices Act before the United States District Court for the Central District of California, the Court found that a relatively high call volume by itself is not a violation of the FDCPA without the requisite intent to harass.

Under 15 U.S.C. section 1692d(5) of the FDCPA, a debt collector can be liable for “[c]ausing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.”  In Hinderstein, the plaintiff had been delinquent on his retail store credit card and had his account sent to the defendant for collections.  Over an 18-day period in the spring of 2015, the defendant placed 49 calls to Hinderstein, with an average of almost three calls per dayHinderstein then sued.

Prior case law has not provided a bright-line rule as to what call volume definitively constitutes a violation of the provision.  Although some courts in the last decade have denied summary judgment under the FDCPA for defendants responsible for heavy call volumes, courts generally will look at the totality of the circumstances in determining whether a defendant has violated the FDCPA.

In Hinderstein, the Court recognized that “the number of calls [did] seem relatively high.”  However, it found no violation where the defendant: (1) placed all calls between 8:00 a.m. and 9:00 p.m.; (2) never made more than five calls per day; (3) allowed at least 90 minutes between calls; (4) never called Hinderstein’s family, friends, or place of employment; (5) only reached Hinderstein once; and (6) respected Hinderstein’s no-call request immediately.  The Court also noted that, prior to the no-call request, Hinderstein had not notified defendant that he felt harassed.  With these factors in mind, the Court concluded that there was no violation of either the FDCPA or the Rosenthal Act.

Creditors under the Rosenthal Act and debt collectors under the FDCPA should still be cautious about their call volume to minimize risk and consumer abrasion.  However, such entities can be comforted by this ruling that persistent outreach in and of itself is not a per se violation, and that context is the most important consideration.

Troutman Sanders LLP has unique, industry-leading expertise with the FDCPA and the Rosenthal Act, with substantial experience advising companies regarding their compliance strategies.  We will continue to monitor judicial interpretation of the FDCPA and similar state laws such as the Rosenthal Act, in order to identify and advise as to potential risks.

 

U.S. District Judge Cathy A. Bencivengo recently dismissed a plaintiff’s TCPA putative class claim due to lack of standing required under Article III.  In Anton Ewing v. SQM US, Inc. et al., No. 3:16-cv-1609-CAB-JLB (S.D. Cal., Sept. 29, 2016), the plaintiff alleged that he received a single survey call made by SQM on Blue Shield of California’s behalf via an automated telephone dialing system without his consent.  In addition to his individual claim, the plaintiff sought class certification for individuals similarly situated within four years prior to the filing of the complaint. 

The claims in this case are important to companies similarly situated to Blue Shield and SQM because opportunistic litigants seek recovery without injury.  The decision applied Spokeo’s requirement for a plaintiff to establish “concrete harm” in order to maintain Article III standing to assert a TCPA claim.  Earlier this year, Spokeo clarified the Article III standing requirement, finding that a bare procedural violation is not enough to confer standing without a direct link to a concrete injury.

The Ewing court reasoned that the plaintiff’s bare procedural violation—i.e., that he “incurred a specific charge for Defendant’s call to his cellular telephone”—was not an injury traceable to the defendants’ alleged usage of an ATDS in violation of the TCPA, and therefore the plaintiff lacked standing.  The decision further demonstrated the split of opinion at the federal district court level regarding how Spokeo applies to TCPA claims.

Even with the Ewing court’s decision, corporations that regularly communicate with their customers via outbound calls, either directly or through third-party vendors, must remain steadfast in implementing and executing their compliance programs.  Until there is a uniform national application of Spokeo to TCPA claims, corporations and their respective counsel should carefully evaluate judicial application of Spokeo within the scope of their business jurisdictions. 

Blue Shield of California was represented by Chad R. FullerVirginia Bell Flynn, and Justin M. Brandt of Troutman Sanders LLP.  Troutman Sanders LLP has unique industry-leading expertise with the TCPA, with experience gained trying TCPA cases to verdict and advising Fortune 50 companies regarding their compliance strategies.  We will continue to monitor regulatory and judicial interpretation of the TCPA in order to identify and advise on potential risks.

As we previously reported, section 301(b) of the Bipartisan Budget Act of 2015 permits an exception to the Telephone Consumer Protection Act of 1991 for calls and text messages “made solely to collect a debt owed to or guaranteed by the United States.”  Although the TCPA generally prohibits calls and text messages using automatic telephone dialing systems (“ATDS”) to wireless telephone numbers without the prior express consent of the called party, the 2015 bill amended the TCPA to allow such communications “made solely to collect a debt owed to or guaranteed by the United States.”

In passing the Bipartisan Budget Act, Congress explicitly tasked the Federal Communications Commission with implementing the TCPA amendment by August 2016, which authorized the FCC “to restrict or limit the number and duration of calls” permitted under the new exception. On August 11, the FCC did just that, issuing an order limiting any such calls “made solely to collect a debt owed to or guaranteed by the United States” without prior express consent to three per month.

The FCC also clarified other aspects of the exception, limiting such calls to those involving “debts that are delinquent at the time the call is made or to debts that are at imminent risk of delinquency.”  The debts must currently be owned or guaranteed by the federal government, and may only be made to the party “legally responsible for paying the debt.”  Three categories of wireless phone numbers may be contacted: (1) a “number the debtor provided at the time the debt was incurred;” (2) a “number subsequently provided by the debtor to the owner of the debt or the owner’s contractor;” and (3) a “number the owner of the debt or its contractor has obtained from an independent source.”

Importantly, collectors of such federally-backed debt must respect consumers’ requests to not receive further calls “at any point the consumer wishes  … .  [Z]ero federal debt collection calls are permitted once a debtor asks the owner of the debt or its contractor to cease federal debt collection calls.”  Given this “right to stop” and the three-call monthly limit, government contractors and holders of government-backed debt must maintain diligent compliance and not simply rely on the new exception as a shield against liability.

Troutman Sanders LLP has unique industry-leading expertise with the TCPA, with experience gained trying TCPA cases to verdict and advising Fortune 50 companies regarding their compliance strategies.  We will continue to monitor legislative changes and regulatory implementation of the TCPA in order to identify and advise on potential risks.

 

On July 14, the Federal Trade Commission announced that it had entered into a final consent order with Ohio auto dealers Progressive Chevrolet Company and Progressive Motors Inc. (collectively, the “Progressive Dealers”), which the FTC had “charged with deceiving consumers by using advertising that touted low monthly car lease payments and down payments but failed to disclose other key terms of the offers.”

The agreement, which is not accompanied by a financial penalty, prohibits the Progressive Dealers “from advertising the amount of any monthly payment, down payment, or other payment, unless they clearly and conspicuously disclose all qualifications or restrictions on a consumer’s ability to obtain the advertised terms.” Any advertisements by the Progressive Dealers limiting offers to certain credit scores must disclose if a majority of consumers are unlikely to meet that threshold.

The FTC barred the Progressive Dealers from misrepresenting the cost of vehicle purchases and leases, or “any other material fact about the price, sale, financing, or leasing of any vehicle.”  Additional prohibitions include “advertising a payment amount, or that any or no initial payment is required at lease inception, without clearly disclosing other key terms.”  The order remains in place for 20 years.

This deal is further indication of the considerable scrutiny that government agencies recently have been giving consumer vehicle purchases.  We previously reported in the past year on administrative settlements involving the FTC and dealer credit reporting; the Massachusetts Attorney General and excessive interest claims; and the Consumer Financial Protection Bureau and Department of Justice and discriminatory loan practices.

Troutman Sanders LLP has extensive experience representing lenders in the auto finance industry, and will continue to monitor CFPB and other regulatory activity in this area.

 

 

On June 28, the Consumer Financial Protection Bureau released its Monthly Complaint Report, which aims to provide “a high-level snapshot of trends in consumer complaints” concerning products such as auto loans, installment loans, and title loans.  The CFPB claims that since it began collecting such complaints in July 2011, it has handled a total of 906,400 complaints, of which approximately 38,500 relate to consumer loans (approximately 7,700 annually).

The majority of consumer loan complaints to the CFPB relate to vehicle loans (52%), with installment loans coming in second (31%).  Almost half (43%) of consumer complaints concerned consumers’ struggles to manage loans, including issues with payment processing and vehicle repossessions.  To help combat these issues, the CFPB hopes that its new Know Before You Owe initiative will help educate consumers in shopping for automotive loans.

The CFPB’s report also documented trends within its collection of complaints.  The report uses a three-month rolling average, comparing the current three-month period with the same period in the previous year in order to consider monthly and seasonal fluctuations.  40 of the 50 states showed an uptick in complaints made to the CFPB during the period March through May 2016 as compared with March through May 2015.  Consumer loans as a whole showed a 27% increase over the three-month period (1,098 complaints) as compared with the same period last year (683 complaints), whereas payday loans showed a 15% decrease.

These published complaints and trends should be considered by companies offering these types of products to determine if their practices or policies can be improved or modified along business lines to avoid unwanted attention from the CFPB and/or plaintiffs lawyers.

Troutman Sanders LLP has extensive experience representing automotive and other consumer lenders, and will continue to monitor CFPB and other regulatory activity in this area.