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9th Circuit says telemarketing texts sent to mixed-use cells phones fall under TCPA
On October 12, a split U.S. Court of Appeals for the Ninth Circuit reversed a district court’s dismissal of a TCPA complaint, disagreeing with the argument that the statute does not cover unwanted text messages sent to businesses. Plaintiffs (who are home improvement contractors) alleged that the defendants used an autodialer to send text messages to sell client leads to plaintiffs' cell phones, including numbers registered on the national do-not-call (DNC) registry. The plaintiffs contented they never provided their numbers to the defendants, nor did they consent to receiving text messages. The defendants countered that the plaintiffs lacked Article III and statutory standing because the TCPA only protects individuals from unwanted calls. The district court agreed, ruling that the plaintiffs lacked statutory standing and dismissed the complaint with prejudice.
On appeal, the majority disagreed, stating that the plaintiffs did not expressly consent to receiving texts messages from the defendants and that their alleged injuries are particularized. In determining that the plaintiffs had statutory standing under sections 227(b) and (c) of the TCPA, the majority rejected the defendants’ argument that the TCPA only protects individuals from unwanted calls. While the defendants claimed that by operating as home improvement contractors the plaintiffs fall outside of the TCPA’s reach, the majority determined that all of the plaintiffs had standing to sue under § 227(b), “[b]ecause the statutory text includes not only ‘person[s]’ but also ‘entit[ies].’” With respect to the § 227(c) claims, which only apply to “residential” telephone subscribers, the appellate court reviewed whether a cell phone that is used for both business and personal reasons can qualify as a “residential” phone. Relying on the FCC’s view that “a subscriber’s use of a residential phone (including a presumptively residential cell phone) in connection with a homebased business does not necessarily take an otherwise residential subscriber outside the protection of § 227(c),” and “in the absence of FCC guidance on this precise point,” the majority concluded that a mixed-use phone is “presumptively ‘residential’ within the meaning of § 227(c).”
Writing in a partial dissent, one judge warned that the majority’s opinion “usurps the role of the FCC and creates its own regulatory framework for determining when a cell phone is actually a ‘residential telephone,’ instead of deferring to the FCC’s narrower and more careful test.” The judge added that rather than “deferring to the 2003 TCPA Order which extended the protections of the national DNC registry to wireless telephones only to the extent they were similar to residential telephones, a reasonable interpretation of the TCPA, the majority has leaped over the FCC’s limitations to provide its own, much laxer, regulatory framework and procedures that broadly allow anybody who owns a cell phone to sue telemarketers under the TCPA.”
District Court rules model validation is not required under FDCPA
On October 13, the U.S. District Court for the Central District of Illinois granted a debt collector’s motion to remand a case back to state court in an FDCPA suit. According to the order, the plaintiff collected unpaid debts for a hospital (defendant) for approximately 15 years. The terms of the formalized agreement established a one-year term that was set to renew automatically so long as the parties agreed to its terms. The agreement required the plaintiff to comply with various laws and regulations, including the FDCPA, and regulations by the CFPB. In November 2021, Regulation F, promulgated by the CFPB, took effect, which clarified a provision of the FDCPA by requiring debt collectors to convey in their initial communications with debtors the debtors’ right to dispute the debt. The order further noted that after the Bureau “provided notice of its intent to enact Regulation F and the public comment period ended, [the plaintiff] ‘began working with its third-party software provider and third-party letter printer to modify [the plaintiff’s] initial contact letter to reflect the safe harbor model in Regulation F.’” However, the defendant was not able to ensure the changes were made before the regulation took effect. The defendant sent the plaintiff a letter declaring that it was in breach of the agreement since it failed to use the safe-harbor model language. The defendant asserted that the plaintiff’s “failure to use the safe-harbor model amounted to a violation of Regulation F and the FDCPA.” The letter requested that the plaintiff terminate all collection activity on the defendant’s accounts. The plaintiff filed suit, seeking a declaratory judgment that the letter it was using complied with the FDCPA. The defendant removed the case to federal court, and the plaintiff filed a motion to remand. The court found that using model notice language is not required under the FDCPA or Regulation F. The court noted that “[a] debt collector may comply by using a different form so long as the required information is provided in a clear and conspicuous manner.” The court further noted that the alleged federal issue in the claim “is not substantial enough” to warrant keeping the case in federal court and granted the plaintiff’s motion to remand the case back to state court.
District Court enters $228 million judgment in BIPA class action
On October 12, the U.S. District Court for the Northern District of Illinois entered a judgment for $228 million after a jury found that a defendant railway company committed 45,600 reckless or intentional violations of the Illinois Biometric Information Privacy Act (BIPA). The jury’s judgment, which does not include pre-judgment interest, was entered against the defendant in the amount of $228 million (BIPA provides for statutory damages of $5,000 for every willful or reckless violation and $1,000 for every negligent violation). Class members consisting of more than 44,000 truck drivers alleged in their second amended complaint that the defendant violated BIPA when it collected, captured, and stored their biometric identifiers and biometric information without obtaining their informed written consent or providing written disclosures explaining the purpose and duration of such use. The defendant countered that it should not be held liable for biometric data collection conducted on its behalf by a third-party contractor because BIPA does not impose liability for the acts of a third party. The court disagreed, ruling, among other things, that BIPA’s language “makes clear that [the defendant] need not have ‘collected’ the data itself to be liable,” and that there is evidence that the defendant “ultimately called the shots on whether and how biometric information is collected.”
Bank agrees to pay $1.8 billion to settle RMBS bond insurance claims
On October 7, a national bank announced in a regulatory filing that it has agreed to pay $1.84 billion to settle claims brought by a bond insurer concerning policies provided on residential mortgage-backed securities before the 2008 financial crisis. According to the regulatory filing, the agreement will “resolve all pending [bond insurer] lawsuits” (containing damages claims of more than $3 billion) against the bank and its subsidiaries, will cause all pending litigation to be dismissed with prejudice, and will release the bank and its subsidiaries from “all outstanding claims” related to bond insurance policies for certain securitized pools of residential mortgage loans.
District Court partially dismisses FDCPA suit concerning disputed debt
On October 5, the U.S. District Court for the District of Arizona partially granted a defendant’s motion to dismiss in an FDCPA suit, which alleged that the defendant furnished information to the credit reporting agencies (CRAs) that did not belong to the plaintiff. According to the order, the plaintiff noticed that the defendant was reporting a collection account to the CRAs for a debt he did not recognize. He called the defendant who was unable to locate the plaintiff through his personal identifiers. The defendant told the plaintiff that the debt reporting on the plaintiff’s credit report was a medical debt and was owed by a third party with a different name and a different social security number. After the defendant confirmed that the debt did not belong to him, the plaintiff submitted a dispute to the CRA challenging the defendant’s reporting of the debt and requested that the defendant and the CRA remove the debt from his report. The CRA notified the defendant of the plaintiff’s dispute within five days of receiving the dispute. The defendant allegedly continued to report the debt as belonging to the plaintiff to the CRA, and did not request that the CRA note on the plaintiff’s credit report that the debt was disputed by the plaintiff. The plaintiff claimed that the defendant violated the FDCPA, contending that his “credit score has decreased as a result of [the defendant’s] erroneous credit reporting, which has frustrated [the plaintiff’s] ability to obtain credit.” The plaintiff also alleged that he suffered emotional distress and anxiety.
The defendant argued that it did not violate the FDCPA because it was the CRA that connected the underlying debt to the plaintiff’s credit report. The defendant also argued that the plaintiff did not provide the defendant with an appropriate period of time to mark the debt as disputed before filing the suit in question. The court found that the plaintiff had stated a claim upon which relief could be granted, explaining, among other things, that the defendant “does not point to any authority that, to state a claim under § 1692e(8), reporting of a debt must be to a credit report as opposed to any third party.” However, the court dismissed the § 1692f claim on the ground that the underlying conduct was already covered in the 1692e(8) claim.
District Court rules in favor of debt collectors in FDCPA, FCRA dispute
On October 7, the U.S. District Court for the Eastern District of Pennsylvania granted defendants’ motion for summary judgment in an FDCPA, FCRA action. According to the opinion, the plaintiff took out a $20,000 loan but never made any payments on the loan. The charged off loan was assigned to the defendant debt purchaser, and a written notice was sent to the plaintiff who requested validation of the debt. The defendant loan servicer provided the account information to the plaintiff and later began furnishing the information to the consumer reporting agencies (CRAs). The plaintiff sued alleging the defendants violated sections 1681s-2(a) and 1681s-2(b) of the FCRA, as well as multiple sections of the FDCPA. Under section 1681s-2(b), a furnisher who has been notified by a CRA of a consumer dispute is required to conduct a reasonable investigation and follow certain procedures. The court noted, however, that these obligations are only triggered if the furnisher received such notice. In this instance, there is no record showing that any CRA reported the plaintiff’s dispute to the defendants, the court said, adding that, moreover, section 1681s-2(a) does not include a private right of action. With respect to the plaintiff’s FDCPA claims, the court determined that, among other things, (i) the plaintiff failed to provide evidence supporting the majority of his claims; (ii) section 1692g does not require the defendants to verify the plaintiff’s account by providing documentation bearing his signature or providing the contractual agreement governing the debt (in this instance, the defendant loan servicer met the minimal requirements by providing an account summary report); and (iii) that nothing in section 1692g requires a debt collector to respond to a dispute within 30 days—this timeframe only applies to when a debtor must dispute a debt, not to the debt collector’s period to provide verification, the court wrote.
SEC accuses crypto companies of $37 million scheme
On September 30, the SEC filed a complaint in the U.S. District Court for the Southern District of Florida against two cryptocurrency companies and their principals (collectively, “defendants”) claiming that they falsely promised investors that their cryptocurrency was backed by a $10 billion gold bullion investment. According to the complaint, the SEC alleged that between May 2018 and January 2019, the defendants “made material misrepresentations and omissions to investors while they were offering and selling [a crypto asset that the companies owned and controlled] in a series of news and press releases issued to the public." The releases falsely claimed that one of the cryptocurrency companies had acquired and received title to $10 billion in gold bullion and intended to back each token that was owned and controlled by the companies issued and sold to investors with $1.00 worth of this gold. One of the companies claimed to have acquired the gold through a purchase transaction with one of the principles and his company. The defendants also misrepresented that independent accounting firms had performed an “audit” of the gold and verified its existence. In reality, the gold acquisition transaction was a sham. The SEC’s complaint alleged violations of anti-fraud and securities registration provisions of the federal securities laws. The SEC is seeking permanent injunctive relief, disgorgement plus prejudgment interest, civil penalties and officer-and-director bars against the individual defendants.
SEC files charges against crypto-asset seminar operation
On September 19, the SEC filed a complaint against a two individuals and the companies they controlled (collectively, “defendants”) in the U.S. District Court for the Southern District of Texas for allegedly operating an on-going fraudulent and unregistered crypto-asset offering targeting Latino investors. According to the SEC, the defendants allegedly raised more than $12 million from over 5,000 investors who paid for seminars to learn how to build wealth through crypto-asset trading. However, the SEC claimed that one of the individual defendants—who founded the company and actually had no education or training in investments or crypto assets—used the seminars to solicit investors to give their money to the company and then supposedly used the funds to conduct crypto asset and foreign exchange trading. In total, the SEC alleged the individual defendants made roughly $2.7 million in Ponzi payments, diverting nearly $8 million for their own personal use. The complaint charges the defendants with violating, or aiding and abetting violations of, the antifraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, and the Securities Act. The company’s founder is also charged with violating the Investment Advisers Act of 1940. The complaint seeks a permanent injunction against the defendants, civil penalties, disgorgement of ill-gotten gains with prejudgment interest, and bars. The SEC stated in its announcement that, at the Commission’s request, the court issued a temporary restraining order to stop the offering, in addition to temporary orders freezing assets and granting additional emergency relief.
CFTC files charges against operators of unregistered digital asset exchange
On October 3, the CFTC filed a complaint against an individual and the four companies he controlled (collectively, “defendants”) in the U.S. District Court for the Southern District of Florida for allegedly operating a digital asset exchange that offered futures transactions on a platform other than a designated contract market. The defendants are also charged with attempting to manipulate the price of the exchange’s native token. According to the CFTC, the defendants used web-based solicitation to obtain customers even though the individual defendant was aware that such participation subjected the exchange to U.S. regulation. The CFTC also claimed that, in addition to allegedly violating certain registration and regulatory requirements, the defendants attempted to artificially inflate the price of the exchange’s “native currency.” Among other things, the defendants are also accused of failing to implement an effective AML program, know-your-customer procedures, or a customer information program to verify the identifies of the customers who purchased the digital assets. The complaint charges the defendants with violations of the Commodity Exchange Act (CEA), and seeks full restitution, disgorgement of ill-gotten gain, civil penalties, permanent trading and registration bans, and a permanent injunction against further CEA violations.
District Court grants preliminary approval of class action in robocall suit
On September 28, the U.S. District Court for the District of Utah granted preliminary approval of a TCPA class action settlement with a digital finance company. According to the plaintiff’s unopposed motion for preliminary approval, the plaintiff alleged that the defendant sent unwanted phone calls to approximately 64,845 unique cellular telephone numbers. The plaintiff’s motion noted that the district court granted, in part, the plaintiff’s motion for class certification and appointment of class counsel, and certified that the class consists of: “[a]ll persons throughout the U.S. (1) to whom [defendant] placed, or caused to be placed, a call, (2) directed to a number assigned to a cellular telephone service, but not assigned to a current or former [defendant] accountholder, (3) in connection with which [defendant] used an artificial or prerecorded voice, (4) from September 1, 2019 through September 21, 2021.” The Tenth Circuit Court of Appeals denied the defendant’s petition for permission to appeal the court’s order certifying the class. After that, the district court approved Plaintiff’s Rule 23(c)(2) class notice plan. After more than two years of “vigorously contested litigation, and as a result of extensive arm’s-length negotiations” the parties agreed to resolve this matter on behalf of a settlement class. The order further noted that the parties’ agreement “calls for the creation of a non-reversionary, all-cash common fund in the amount of $5 million, from which participating settlement class members will receive substantial payments.”