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As we previously reported, last year the United States District Court for the Middle District of North Carolina trebled a jury verdict against DISH Network L.L.C. in a Telephone Consumer Protection Act class action, resulting in a $61 million damages award.  After months of post-trial motions (which were denied), the Court now recently ruled on class counsel’s request for attorneys’ fees, awarding $20.4 million.

Class counsel requested attorneys’ fees of 33.33% of the total judgment.  The Court found that a fee of $20,447,600, which is one-third of the approximately $61 million judgment, was reasonable.  According to the order, class counsel spent approximately 8,500 hours prosecuting the case and expended almost $500,000 of their own money.  The Court noted that “it takes skilled counsel to successfully manage an 18,000-plus member class action.  It takes a different set of highly developed skills to successfully achieve a jury verdict.”  The Court further noted that “Class Counsel achieved an excellent result on behalf of the class.”

A copy of the Court’s order can be found here.

We will continue to monitor the case for further developments.

The United States District Court for the Northern District of Alabama ruled in favor of a debt collector in Swann v. Dynamic Recovery Solutions LLC, granting a motion to dismiss regarding a statute of limitations disclosure in a collection letter.

Plaintiff Susan Swann alleged violations of Section 1692 of the FDCPA for making false, deceptive, and misleading statements regarding consumer debts regarding DRS’s attempt to collect on a debt by letter.  At the time the letter was sent to Swann, the statute of limitations for filing a lawsuit to collect the debt had passed.

In the letter, DRS stated that it had been hired by the owner of the debt to collect on a past due balance on a Verizon Wireless account.  The letter detailed four methods for which Swann could “resolve” the debt.  Upon receipt of payments, the letter stated that the account would be considered “satisfied and closed.”  The letter also contained a disclaimer regarding the time-barred nature of the debt.  As part of the disclaimer, the letter stated that DRS would not sue Swann because of the age of the debt.

Swann took issue with the letter’s disclaimer which stated that the debt was time-barred and that she would not be sued.  She alleged that the disclaimer was ineffective because it failed to inform her that it could not legally sue, rather than that it had simply chosen not to do so.  Further, Swann argued that the terms “resolve” and “satisfaction” contained in the letter implicitly carried a threat of litigation.

The Court disagreed with Swann’s first argument regarding the disclaimer, holding that DRS was not required to include a disclaimer notifying her of the time-barred nature of the debt.  Rather, the Court noted, disclaimers are intended to “offset other language in the letter which may, at least impliedly, threaten litigation.”  Further, the Court found that the “will not sue” language used by the defendant is the same language that was approved by the Federal Trade Commission and the Consumer Financial Protection Bureau.  As a result, the Court found that the disclaimer did not run afoul of the FDCPA.

The Court also disagreed with the plaintiff’s argument that the words “resolve” and “satisfaction” implicitly carry a threat of litigation.  In her brief, Swann insisted that these terms would lead the least sophisticated consumer to believe that they might be sued if the debt was not paid off.  The Court cited the Third Circuit’s decision in Tatis v. Allied Interstate, LLC which held that although words like “settlement” and “settlement offer” could potentially imply a threat of litigation, general verbs like “resolve” are less likely to do so.

Generally, the issue of whether the least sophisticated consumer would interpret a collection letter as deceptive is a question for the jury, and thus not an issue that could be resolved on a motion to dismiss.  However, after drawing all reasonable inferences from the allegations in the complaint in Swann’s favor, the Court concluded that the least sophisticated consumer could not possibly view these terms as a threat of litigation.  Therefore, the Court ruled that the issue could be decided on a motion to dismiss and found that the complaint failed to allege a plausible theory of relief for the jury to consider.

The claims in this case regarding whether and how to inform consumers that an account is outside the applicable statute of limitations are being brought all over the country following the Seventh Circuit’s decision in the Pantoja case.  The lack of consistency in how courts are deciding this issue continues to flummox the collection industry, and this uncertainty is expected to continue into 2019 until these cases are taken up by more circuit Courts of Appeals.

 

 

In what could be seen as an early holiday present to those institutions often entangled in Telephone Consumer Protection Act litigation, a district court in the Eleventh Circuit not only denied certification in a TCPA wrong number class action, but also struck down common methods used by plaintiffs to ascertain class members.  Going further, the Court found that wrong number class actions are fatally plagued by individualized inquiries of consent where a defendant intends to call actual consenting customers, and topped everything off with due process considerations.

In Wilson v. Badcock Home Furniture, the Court began its analysis by finding fundamental problems with ascertainability, noting the difficulties in identifying individuals receiving a “wrong number” call.  Typically a defendant’s records will only show that a wrong number was dialed but nothing further regarding the individual that received the call.  Plaintiffs therefore generally propose using a reverse-number lookup and subpoenas to cell phone carriers for copies of call records.  This method, however, will not identify call recipients who are regular users under a family cell phone plan, and this is where the Court ruled the reverse-lookup method “truly fell apart” (noting that the class plaintiff would not have even been identified using this method) and found that there was “no way to definitively determine who actually answered the call from the defendant … .”

The Wilson defendant also identified multiple instances where more than one customer provided the same phone number.  As is commonly seen in TCPA litigation, the plaintiff proposed the “ask the subscriber” approach, but the Court rejected this method for three reasons.  First, the method “ignores the very purpose of ascertainment and will, in any event, require an individualized inquiry.”  Second, the “ask the subscriber” method could violate a defendant’s due process protections as penalties of up to $1,500 per call could incentivize individuals to improperly enter the class.  Finally, the Court ruled that this method would lead to nothing but inadmissible hearsay, finding that “a call recipient’s statement of ‘wrong number,’ as well as the simple act of Defendant listing a number as ‘wrong number’ may not be admissible as a matter of federal evidence as proof of the matter asserted, even if the number is labeled as ‘wrong’ in Defendant’s business records.  The unknown person answering on the phone was under no business duty to make that declaration, which is likely hearsay to prove the number was in fact wrong.”

Aside from the obvious ascertainability issues, the Court found predominating individualized issues of consent, noting that the defendant only calls numbers in its records thought to have belonged to actual consenting customers which raises possible defenses against many class members.  Again, the Court addressed due process concerns, finding that with the TCPA’s high statutory penalties, due process allows the defendant to inquire “whether the alleged wrong number belonged to a customer by consulting each individual file” and not leave the defendant at the mercy of the prospective class members.

The Wilson decision is significant and sets out a roadmap to defeat common methods used for class certification in wrong number TCPA cases. Importantly, the Court laid out arguments for defeating plaintiffs’ unreliable methods of identifying class members and stressed the importance of individualized inquiries of consent when a defendant simply attempts to call consenting phone numbers.

 

 

This past November, the Department of Veterans Affairs (the “VA”) and the Federal Trade Commission signed an updated Memorandum of Agreement, which pledges ongoing efforts in the oversight and enforcement of laws pertaining to the advertising, sales, and enrollment practices of institutions of higher learning and other establishments that offer training for military education benefits recipients.  A copy of the Memorandum of Agreement can be found here.

The two government agencies agreed to cooperate in the investigation of entities that target military service members through deceptive or unfair advertising or enrollment practices, and potentially coordinate efforts in enforcement actions.  Critically, the revised Memorandum of Agreement highlights the terms under which the VA can refer potential violations to the FTC.

The Memorandum of Agreement suggests that the FTC may make servicemember protections, including the Servicemembers Civil Relief Act (“SCRA”), a key area of its focus and enforcement activity in 2019.  Troutman Sanders will continue to monitor developments involving the FTC and will provide any further updates as they are available.

After months of negotiations, on December 12, Congress overwhelmingly passed the Agricultural Improvement Act of 2018, which is also known as the “Farm Bill.”  For banks and payment processors, the Farm Bill’s passage is an important development because the bill includes language removing hemp from the list of prohibited substances under the federal Controlled Substances Act.

Hemp is a variety of the cannabis plant, but it does not produce a psychological “high.”  Instead, it’s used in manufacturing, including production of textiles, rope, and carpets, and for medicinal purposes.  Most states permit hemp’s use for both manufacturing and medicinal purposes.

But, for years, hemp has been classified as a controlled substance under the federal Controlled Substances Act, (21 U.S.C. ch. 13 § 801 et seq.), which created a federal law barrier to banks and payment processors working with hemp producers or merchants.

With the passage of the Farm Bill, however, that may be about to change.  Section 10113 of the Farm Bill removes hemp from the list of controlled substances under the federal Controlled Substances Act and amends the Agricultural and Marketing Act of 1946 to allow states to manage hemp production as long as hemp produced contains no more than a 0.3% concentration of tetrahydrocannabinol, or THC.

In accordance with the Farm Bill, a state that wants to manage hemp production within its borders must submit a plan for regulation and monitoring to the U.S. Secretary of Agriculture for approval.  However, a hemp producer in a state that does not submit a plan to the Secretary of Agriculture may still produce hemp as long as its production complies with the amended section 297C of the Agricultural and Marketing Act.

The Farm Bill further mandates that hemp producers complying with section 297C, as opposed to a state plan, must maintain information about the land on which the hemp is produced, test the hemp’s THC levels, establish procedures for disposing of any non-compliant hemp or hemp product, and submit to annual inspections.  Hemp producers operating under either an approved regulation-and-monitoring plan or section 297C are subject to licensing requirements as well as potential federal auditing.  Moreover, under the Farm Bill, states maintain authority to limit hemp’s production and marketing within their borders.  Thus, hemp producers, depending on where they operate, may still be restricted by state law.  States cannot, however, limit the transportation of hemp.

The Farm Bill creates an opportunity for banks and payment processors.  Banks and payment processors can now work with hemp producers and merchants without the looming threat of a federal law enforcement action.

The Farm Bill’s passage does not mean, however, that banks and payment processors can forego their regulatory compliance efforts.  A bank or payment processor must still ensure that any hemp producer or merchant is complying with the Farm Bill’s licensing requirement and TCH-level restriction.  In addition, a bank or payment processor that works with a hemp producer or merchant must still ensure that the producer or merchant is complying with any federally approved regulation-and-monitoring state plan or section 297C.  Indeed, those compliance efforts are critical, as violations can leave a hemp producer or merchant as well as its bank and payment processor subject to severe penalties, including a law enforcement action by the U.S. Attorney General.

President Trump signed the Farm Bill on December 20.

The United States District Court for the Western District of Washington recently granted a debt collector’s motion for summary judgment on a debtor’s Fair Debt Collection Practices Act claims stemming from a collection letter sent in an effort to collect on unpaid bills for medical services.

In McBroom v. Syndicated Office Systems d/b/a Central Financial Control, No. 2:18-cv-00102-JCC (Nov. 28, 2018), plaintiff Charles McBroom received medical treatment from Franciscan Medical Group West Seattle, which commonly transacts business as “FMG West Seattle.”  McBroom failed to pay the balance due for his medical treatment.  As a result, FMG West Seattle placed McBroom’s account with a debt collector—defendant Central Financial Control—who sent a letter to McBroom notifying him of the debt.

The letter sent to McBroom identified FMG West Seattle as the relevant “facility” and listed an account number, patient reference number, the date of service, and an account summary with the account’s balance.  The letter not only identified Central Financial Control as a “debt collector,” but also stated that McBroom’s account had been placed with Central Financial Control for collection of the balance, and that McBroom could contact Central Financial Control for financial assistance or a payment arrangement.

In addition to the above, the letter provided a second phone number and website “for more information about financial assistance.”  This phone number and website belonged to CHI Franciscan Health.  Franciscan Medical Group is a wholly-owned subsidiary of Franciscan Health Systems d/b/a CHI Franciscan Health.

McBroom filed suit against Central Financial Control, in which he alleged that this letter violated the FDCPA by failing to clearly identify the creditor of the debt under 15 U.S.C. §1692g(a)(2) and by failing to meaningfully convey the name of the creditor under 15 U.S.C. § 1692e.  Central Financial Control moved for summary judgment seeking dismissal of both FDCPA claims.

In evaluating McBroom’s section 1692g(a)(2) claim, the Court noted that the letter’s “account” section listed FMG West Seattle as the only facility and that a separate section of the letter indicated that amounts owed may vary based on other coverage for medical services “received from FMG West Seattle.”  The Court further noted that the letter identified Central Financial Control as a debt collector and, although it directed that payments be made to Central Financial Control, it described McBroom’s account as being “placed” with Central Financial Control.  Finally, the Court noted that although CHI Franciscan Health’s contact information was provided at the close of the letter, this section is entirely devoted to financial assistance.  Taken together, the Court found that these statements did not render the identity of the account’s creditor unclear.

The Court used these same factors to evaluate McBroom’s section 1692e claim.  In particular, the Court noted that the letter failed to indicate that ownership of the account had been transferred to Central Financial Control, and that the limiting language used to describe the assistance provided by CHI Franciscan Health meant that it could not reasonably be interpreted as a creditor.  Accordingly, the Court granted Central Financial Control’s motion for summary judgment and dismissed both of the plaintiff’s FDCPA claims.

Troutman Sanders will continue to monitor and report on developments in this area of the law.

 

U.S. District Judge Brian R. Martinotti recently granted in part and denied in part a motion to dismiss a Telephone Consumer Protection Act class action lawsuit based on unsolicited text messages sent through an automated dialing system.  The ruling illustrates the nuanced approach taken by some courts in analyzing whether individual text messages can form the basis of a TCPA suit.

In Zemel v. CSC Holdings, LLC, Case No. 18-2340-BRM-DEA, plaintiff Daniel Zemel alleged violations of the TCPA based on three text messages allegedly sent by an automatic dialer on behalf of CSC Holdings.  The first text message was a confirmation to Zemel regarding the creation of an account (Zemel contended that this first message was unsolicited).  The first text message invited him to either respond “STOP” to opt out of receiving messages, or “HELP.”  Zemel responded to the first text message with the message “HELP.”  He then received a second text message with information on how to get live support, to which he responded “STOP.”  The third and final text message asked him to identify the messages he wanted to opt out of.

The Court ruled that Zemel had pled sufficient factual allegations to state a TCPA claim based on the first text message.  Specifically, the claim avoided dismissal by alleging that CSC Holdings used an automatic dialer to send the unsolicited first text message.  The Court, however, dismissed the other TCPA claims arising from the second and third texts.  According to the Court, Zemel consented to the second text by texting “HELP” in response to the first text message.  The district court judge ruled that there is no TCPA violation “when an individual sends a message inviting a responsive text.”  The Court further found that the third text message was merely confirmatory and also not in violation of the TCPA, ruling that “not only is this clearly a confirmatory text, not including any marketing material, but it was the only additional text message sent.”

The Court’s ruling in Zemel is based on a close analysis of individual text messages to determine application of the TCPA.  TCPA defendants would be well-advised to perform similar analyses of individual text messages to avoid potential violations.

Troutman Sanders is counsel in numerous TCPA individual and class actions throughout the country and routinely advises clients on potential TCPA issues.

 

The recent courtroom battle over the admissibility in a criminal trial of statements made by former Deutsche Bank AG traders to Deutsche Bank’s outside counsel during its internal investigation into misconduct involving the London Interbank Offered Rate, or Libor, shines a spotlight on a potentially recurring problem in criminal prosecutions that arise out of or rely on evidence gathered during internal investigations — excessive entanglement between company counsel and government regulators conducting parallel investigations. The problem? The Constitution. Indeed, government entanglement in or direction of an internal investigation can lead a court to conclude that company counsel acted on behalf of the government, subjecting its otherwise private investigative activity to constitutional scrutiny.

Others have written on the specific problem that arose in the Deutsche Bank Libor-manipulation trial and lessons learned from that particular situation, in which the parties litigated whether company counsel’s allegedly coerced interviews violated the Fifth Amendment. But this article focuses more broadly on the host of “state action” problems that can arise when excessive entanglement exists between government lawyers and company counsel who are conducting an internal investigation, and provides some practical tips for how to avoid those problems.

To read full article go to Law360

On December 17, a federal judge in the U.S. District Court for the District of New Jersey denied a motion to dismiss a lawsuit alleging that Quest Diagnostics violated the Telephone Consumer Protection Act by placing debt collection calls to an individual on her mobile device without her consent.

In his six-page opinion, Judge William J. Martini ruled that plaintiff Judy Wilson had sufficiently alleged that the equipment used to place the call at issue qualified as an automatic telephone dialing system, or ATDS, which is prohibited under the TCPA and is defined under the statute as “equipment which has the capacity to store or produce telephone numbers to be called, using a random or sequential number generator and to dial such numbers.”

Wilson alleged that she received an unsolicited call from Quest, the purpose of which was to collect a debt from someone other than Wilson. This was the first call Wilson ever received from Quest, and she had not previously consented to being contacted by Quest on her cell phone. Wilson also alleged that when she answered the call, she heard a momentary pause before a representative spoke to her, a fact which indicated (to Wilson) that Quest had used a predictive dialer to place the call.

Judge Martini’s ruling noted that a predictive dialer has been considered an ATDS under “binding precedent,” and held that “[d]ead air after answering the phone is indicative that the caller used a predictive dialer.”

The key question in the case was what falls within the TCPA’s definition of “autodialer.”  In 2003, the FCC issued a ruling that found that a predictive dialer, such as “equipment that dials numbers and, when certain computer software is attached, also assists telemarketers in predicting when a sales agent will be available to take calls” fell within the TCPA’s definition of an ATDS.  The FCC reaffirmed this finding in 2008 and again in 2015 in an omnibus order.

In March 2018, the D.C. Circuit ruled in ACA International v. FCC that that the FCC’s 2015 broad interpretation of autodialer was “utterly unreasonable” because under such a broad definition, all smartphones would be considered autodialers.  In June, the Third Circuit agreed and ruled in Dominguez v. Yahoo that ACA International was binding.

Judge Martini’s ruling interpreted Dominguez to mean that ACA International did not strike down the FCC’s 2003 and 2008 orders, but only the 2015 omnibus order.  Citing the 2003 order, Judge Martini concluded that “a predictive dialer qualifies as an ATDS so long as it has the capacity to dial numbers without human intervention.”

Judge Martini’s ruling leaves room for the autodialer issue to be revisited later in the litigation, after the parties have had an opportunity to conduct discovery.

 

 

 

Just about every week, there’s a reminder that cybersecurity remains important. But that doesn’t mean that many are taking it as seriously as they should. In the past month alone, Legaltech News has reported surveys that note how law firms are not adopting proper cyber protocols, companies haven’t mitigated third party risks, and attorneys are  vulnerable to biometric, cloud and phishing attacks. This isn’t just a U.S. problem either.

Meanwhile, the focus on privacy seems to be ever increasing. Sometimes, it’s a renewed focus on privacy regulations following the EU’s General Data Protection Regulation (GDPR) or the California Consumer Privacy Act of 2018. Other times, it’s a matter of court cases, like the U.S. Supreme Court’s Carpenter v. U.S. ruling. But in general, maybe it’s just public awareness, as consumers in both the U.S. and abroad become increasingly aware of how their personal data is used.

 

To read full article go to Law.com