Floodgates to New York Telemarketing Class Actions Under the TCPA Are Open, Says Second Circuit
Just in time for the holidays, the Second Circuit's recent decision in Bank v. Independence Energy Group LLC has dropped a lump of coal in the business community's stocking. In this case, the "lump of coal" is an open door to class actions under the Telephone Consumer Protection Act in federal courts in New York.
We frequently blog about the TCPA, which has emerged into one of the favorite toys of the plaintiffs' bar. The TCPA authorizes the recipients of certain unsolicited telemarketing faxes, calls, and text messages to sue for statutory damages of between $500 to $1,500 per violation. If those statutory damages are aggregated in a class action, plaintiffs' counsel can threaten the targeted defendant with such enormous liability—sometimes in hundreds of millions or billions of dollars—that the defendant will have a powerful incentive to agree to a blackmail settlement. (See some of our recent posts on challenging this kind of aggregation and on new developments regarding consent and vicarious liability under the TCPA.)
Until the Second Circuit's recent decision in Bank, defendants facing TCPA class actions in New York had a strong defense. That's because the TCPA permits suits only "if otherwise permitted by the laws or rules of court of a State" (47 U.S.C. § 227(b)(3)), and a New York statute specifies that a class action "may not be maintained" to recover a "penalty" or statutory "minimum" damages (N.Y. CPL § 901(b)). The New York ban on class actions seeking statutory damages forbids TCPA class actions in state court. And the Second Circuit previously had held that the New York law also bars TCPA class actions in federal court, because the TCPA itself forbids such suits when not "permitted by the laws * * * of a State." See, e.g., Bonime v. Avaya, Inc., 547 F.3d 497 (2d Cir. 2008).
The plaintiffs' bar has devoted years to attacking that approach. Plaintiffs based their first major argument on the Supreme Court's holding in Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., 130 S. Ct. 1431 (2010), that the New York law did not apply to class actions brought in federal court under the Class Action Fairness Act of 2005. But the Second Circuit held firm, sensibly concluding that allowing plaintiffs a federal forum for TCPA class actions in New York was irreconcilable with the deliberately state-centric language of the statute, which "delegate[d] * * * to the states considerable power to determine which causes of action lie...
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