TCPA Class Actions Coming To New York

A recent decision by the U.S. Court of Appeals for the Second Circuit may lead to a wave of class action litigation in New York under the Telephone Consumer Protection Act ("TCPA"). See Bank v. Independence Energy Grp. LLC, No. 13-1746-cv (2d Cir. Dec. 3, 2013).

The TCPA is a federal statute that imposes stiff statutory penalties of $500 to $1,500 per violation regardless of any actual damage. See 47 U.S.C. § 227. The TCPA prohibits calls and text messages to cell phones without prior express consent. It also prohibits certain types of calls to residential lines and certain types of faxes. Because of its statutory penalties, it has become a favorite among the plaintiff's class action bar in recent years, especially in California, Illinois, and Florida. Its statutory penalties, on a class action basis over a four-year period, are crushing—at least $500,000 for 1,000 violations, $5 million for 10,000 violations, $50 million for 100,000 violations, etc.

Until now, New York has received safe harbor from this storm under state Civil Practice Law and Rule 901(b). That rule prohibits class action claims for statutory damages in New York. Many courts in New York, including the Second Circuit in 2008, applied Rule 901(b) to bar TCPA class actions for statutory penalties in that state. See, e.g., Bonime v. Avaya, Inc., 547 F.3d 497, 502 (2d Cir. 2008) (holding that "federal courts should apply C.P.L.R. 901(b) to putative class actions brought for alleged TCPA violations").

In Bank, however, the Second Circuit has now reversed itself. It did so based on the recent U.S. Supreme Court decision in Mims v. Arrow Fin. Servs., LLC, 132 S. Ct. 740 (2012), which held that federal courts have concurrent jurisdiction over TCPA claims and that federal law "both creates the claim" and "supplies the substantive rules that will govern"...