Seyfarth Synopsis: In Spokeo, Inc. v. Robins, the U.S. Supreme Court held that a plaintiff must have a concrete injury to sue for FCRA violations. Following Spokeo’s remand, courts have held that consumers have standing to sue if their reports are inaccurate even if an inaccuracy did not adversely affect them.

In Spokeo, the U.S. Supreme Court reaffirmed that plaintiffs seeking to sue in federal court must have a concrete, actual injury; a mere statutory violation is not enough. The U.S. Supreme Court remanded the case for the Ninth Circuit to determine whether the plaintiff had alleged a concrete injury. (See our prior posts here, here, here, and here for a summary of the case background and a more detailed explanation of the U.S. Supreme Court’s ruling.)

The Ninth Circuit’s Ruling on Remand

On remand, in Robins v. Spokeo, Inc., the Ninth Circuit concluded that the plaintiff had sufficiently pled a concrete injury in fact and thus had standing to proceed with his FCRA claims. The court stated that, although a plaintiff may not show an injury-in-fact merely by pointing to a statutory violation, “some statutory violations, alone, do establish concrete harm.” To determine whether a statutory violation is itself a concrete injury, the court created a two-part test that asks (1) whether the statutory provision at issue was established to protect the consumer’s concrete interests (as opposed to purely procedural rights), and, if yes, (2) whether the specific procedural violation alleged actually harmed or presented a material risk of harm to those interests.

On the first question, the Ninth Circuit noted that the plaintiff had alleged a violation of the FCRA’s requirement that a consumer reporting agency have reasonable procedures in place to ensure the maximum possible accuracy in reporting. The court concluded that this provision “protect[s] consumers’ concrete interests” in accurate reporting and consumer privacy and that these interests are “‘real’ rather than purely legal creations.” The court reasoned that “given the ubiquity and importance of consumer reports in modern life—in employment decisions, in loan applications, in home purchases, and much more—the real-world implications of material inaccuracies in those reports seem patent on their face.” The court also noted that “the interests that FCRA protects also resemble other reputational and privacy interests that have long been protected in the law.”

As to the second question, the Ninth Circuit stated that it required an “examination of the nature of the specific alleged reporting inaccuracies to ensure that they raise a real risk of harm to the concrete interests that the FCRA protects.” The court concluded that, while a benign inaccuracy may not be harmful, the plaintiff had raised a real risk of harm by alleging that the defendant had inaccurately reported that he was married, had children, was in his 50’s, was employed, had a graduate degree, and was financially stable. The court reasoned that this information “is the type that may be important to employers or others making use of a consumer report.”

The Ninth Circuit held that whether an employer or other end user considered the inaccurate information was irrelevant. Although the defendant argued that the plaintiff must show that the information actually harmed his employment prospects or presented a material or impending risk of doing so, the court disagreed. In the court’s view, “[t]he threat to a consumer’s livelihood is caused by the very existence of inaccurate information in his credit report and the likelihood that such information will be important to one of the many entities who make use of such reports.” Thus, a materially inaccurate report is itself a concrete injury.

Although the Ninth Circuit spoke of harm and materiality, the crux of the opinion appears to be that any inaccuracy will provide standing if it involves information that a user of a report may consider even if no one ever does consider it. And that is how one court recently interpreted the ruling.

In Alame v. Mergers Marketing, a judge in the Western District of Missouri held that a plaintiff had standing to sue because he alleged that the defendant’s reporting made it appear that he moved around a lot. The plaintiff’s background report included 22 address entries for him. Some of the address entries were for the same location but varied as to the formatting of the address. The plaintiff claimed that reporting formatting variations inaccurately conveyed that he had lived at 22 different locations. The plaintiff did not allege that anyone had interpreted the report that way or that he had not lived at those locations. Nonetheless, quoting Robins, the court held that a plaintiff is injured by “‘the very existence of inaccurate information in his credit report.’”

Potential Conflict with Spokeo and Dreher

The Ninth Circuit’s opinion is difficult to reconcile with Spokeo. In Spokeo, the U.S. Supreme Court held that, to be sufficient, an injury must “actually exist” and clarified that “not all inaccuracies cause harm or present any material risk of harm” to a plaintiff. Yet, the Ninth Circuit held that an inaccurate report is itself a concrete injury even if the only people who received the report were the plaintiff and his lawyer. (The plaintiff did not allege that the defendant had furnished his report to anyone other than the plaintiff and his lawyer.)

The Ninth Circuit’s position also seems to conflict with the Fourth Circuit’s ruling in Dreher v. Experian Information Solutions. In that case, the plaintiff sued a consumer reporting agency for inaccurately identifying the source of credit information in his report. The Fourth Circuit rejected the plaintiff’s argument that the inaccuracy itself was an injury. Instead, the court held that a plaintiff must show that he “was adversely affected by the alleged error on his report.” The court reasoned that an inaccuracy “work[s] no real world harm” unless it has a negative impact on the consumer.

Implications for Businesses

Robins and Dreher indicate that the federal courts are still grappling with Spokeo’s meaning. We expect the issue will continue to percolate in the federal courts. If the divide on Spokeo’s application deepens among the federal courts of appeal, the U.S. Supreme Court may revisit the standing issue to provide more clarity.

For now, under Robins, consumers may be able to bring FCRA claims in federal court whenever their reports contain inaccurate information unless that information is truly benign, such as when an address contains a mistyped zip code. Even if a plaintiff lacks Article III standing under Dreher, he or she may be able to proceed in state court in jurisdictions that recognize broad standing to sue for any statutory violation.

For this reason, companies preparing or obtaining credit checks, employment checks, or other background checks should be careful to comply with each of the FCRA’s highly technical requirements. Similarly, companies, such as financial institutions, that furnish information about customers to consumer reporting agencies should ensure that they have measures in place to ensure accurate reporting and to handle consumer disputes properly. Failing to comply with a FCRA requirement could expose a company to class action liability even if the violation did not affect the plaintiff or any class member.

If you have questions about these or other issues, please reach out to the author or your Seyfarth attorney.

For lawyers who frequently litigate class action lawsuits, whether or not the named plaintiffs have standing to bring a claim is one of the first issues that is analyzed and considered.  Plaintiffs’ lawyers often look for named plaintiffs that have suffered easily identifiable damages, while defense lawyers often rely on standing defenses to ward off costly class action cases.data-breach-warning-label

Background

In order to have standing under Article III of the United States Constitution, potential plaintiffs must be able to show that the injury suffered is (1) concrete, particularized, and actual or imminent, (2) fairly traceable to the challenged action, and (3) redressable by a favorable ruling.  These three factors have been subject to much debate and judicial review.  In recent years, standing has been frequently litigated in cases where plaintiffs claim that they were injured due to someone gaining access to their confidential or private information.

In 2013, the United States Supreme Court attempted to provide guidance on standing questions in the digital age in the case of Clapper v. Amnesty International.  In Clapper, the plaintiffs challenged the constitutionality of section 702 of 50 U.S.C. § 1881a, the Foreign Intelligence Surveillance Act (“FISA”).  Section 702 was added by the FISA Amendments of 2008 and permits the Attorney General and the Director of National Intelligence to conduct warrantless wiretapping of telephone and email communications of certain persons located outside the United States.  Plaintiffs contended that the FISA violated their fourth amendment rights because plaintiffs may have confidential communications with non-United States persons who are subject to surveillance under FISA.

In ruling that the plaintiffs did not have standing to challenge the statute, the Supreme Court made several impactful statements that have resonated with the lower courts.  With respect to the first standing element that the injury suffered must be concrete, particularized, and actual or imminent, the Supreme Court stated that the “threatened injury must be certainly impending to constitute injury in fact.”  Since the plaintiffs could only speculate as to whether their conversations would be intercepted, the first standing element was not met. The court found that allegations of possible future injury are not sufficient.  Alternatively, plaintiffs argued that they have already suffered a concrete injury because they were undertook costly and burdensome measures to protect the confidentiality of their communications.  The Supreme Court found that plaintiffs could not “manufacture standing merely by inflicting harm upon themselves” and that fear is insufficient to create standing.

Clapper was considered a win by many retailers who were vulnerable to large class action suits by customers following incidents of privacy breach.  In many district court cases, relying on the reasoning in Clapper, retailers were able to successfully dismiss claims where customers claimed that their confidential information was exposed to hackers, but were unable to articulate a concrete and imminent injury, as opposed to a hypothetical future injury, had already occurred.

Decision

The Seventh Circuit, however, took a more expansive view of standing in Remijas v. Neiman Marcus Group, LLC.  In mid-December 2013, Neiman Marcus suffered a data breach caused by hackers.  The banking information of approximately 350,000 may have been compromised.  Neiman Marcus notified all customers and offered one year of free credit monitoring and identity-theft protection.  The plaintiffs in Neiman Marcus, filed suit relying on a number state data breach laws for relief.  Neiman Marcus’s motion to dismiss for lack of standing was granted by the district court and plaintiffs appealed to the Seventh Circuit.

The Seventh Court reversed, and held that plaintiffs did have standing to proceed against Neiman Marcus.  The class of plaintiffs contained persons who experienced fraudulent charges on their accounts, and those that did not.  With respect to plaintiffs who experienced fraudulent charges, Neiman Marcus argued that they had not suffered actual injuries because they were reimbursed.  The court found this argument unavailing because there are identifiable costs associated with “the process of sorting things out.”  With respect to the plaintiffs who have not yet seen fraudulent charges on their accounts, the Seventh Circuit said those plaintiffs had standing because there was a “substantial risk” of future harm.  The Seventh Circuit stated that Clapper does not foreclose any use whatsoever of future injuries to support Article III standing.  Notably, the Seventh Circuit also referenced the fact that Neiman Marcus offered one year of credit monitoring and identity-theft protection as a reason for concluding that the risk of harm is not “so ephemeral that it can be safely disregarded.”

Implications

The ruling in Neiman Marcus is at odds with prior, lower court precedent interpreting Clapper.  Nevertheless, it will likely be cited as a leading authority on the scope of Clapper and the issue of standing in data breach cases.  Retailers should be aware of the ruling in Neiman Marcus and its implications, as it arguably makes the standing hurdle easier to overcome for plaintiffs in data breach or privacy cases.  Retailers should also be mindful that “good-will” policies, such as notification to customers of a data breach and offering of credit monitoring services, may be considered by the Court in its reasoning to find that plaintiffs have standing.  The business benefits of these “good-will” policies need to be weighed against the litigation costs when formulating company strategies.

The reach of the Seventh Circuit’s ruling in Neiman Marcus has yet to be tested, but we anticipate that it will spawn more litigation and lengthier cases as more plaintiffs file suit and survive past motions to dismiss based on standing.  We will continue to provide updates on this topic if more circuit courts weigh in on this important issue.

Today, the U.S. Supreme Court agreed to hear an appeal challenging an almost $6 million judgment awarded in a class action case against Tyson Foods, Inc.  See Bouaphakeo, et al. v. Tyson Foods, Inc., No, 12-3753 (8th Cir. 2014).

The Court will decide  (1) whether, in a class or collective action, liability and damages may be determined by statistical techniques that presume all class members are similar; and (2) whether a class or collective action may include individuals who were not injured.

supreme-court

Case Background

Plaintiff employees brought a collective and class action against Tyson under the Fair Labor Standards Act (“FLSA”) and a parallel state law.  The plaintiffs alleged that they were entitled to damages because Tyson failed to compensate them for overtime spent “donning” and “doffing” protective equipment and walking to and from their work stations.  The district court certified a class based on the existence of common questions about whether those activities were “work” under the FLSA and the state law.  At trial, the plaintiffs proved liability and damages by using statistical evidence of the average donning, doffing, and walking times for employees.  The jury returned a verdict for the class, and the final judgment totaled $5.8 million.

On appeal, Tyson contended that certification was improper because employees’ individual routines varied and, thus, the litigation could not generate common answers apt to drive the resolution of the litigation as required under Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).  Tyson pointed out that liability and damages were only inferred as to individual class members based on statistical evidence.  Tyson further noted that some class members did not work overtime and thus were not entitled to any damages.  The Eighth Circuit Court of Appeals rejected these arguments, holding that liability and damages could be proven by inference and that issues relating to individual damages do not preclude certification.

In March 2015, Tyson filed a petition for a writ of certiorari presenting the following issues:

(1) Whether differences among individual class members may be ignored and a class action certified under Federal Rule of Civil Procedure 23(b)(3), or a collective action certified under the Fair Labor Standards Act, where liability and damages will be determined with statistical techniques that presume all class members are identical to the average observed in a sample; and

(2) whether a class action may be certified or maintained under Rule 23(b)(3), or a collective action certified or maintained under the Fair Labor Standards Act, when the class contains hundreds of members who were not injured and have no legal right to any damages.

Appellate courts are divided on these issues.  Like the Eighth Circuit, the Tenth Circuit has permitted damages in class actions to be extrapolated based on averages.  In contrast, the Second, Fourth, Fifth, Seventh, and Ninth Circuits have questioned the use of class certification in cases where individual damages would have to be inferred from averages or statistical sampling.  Similarly, the courts disagree on whether each putative class member must have standing for a class to be certified.

Potential Implications for Businesses

The Court will hear the case during its next term, along with Spokeo, Inc. v. Robins, which presents the question of whether an individual who did not suffer a concrete injury from a statutory violation has standing to sue on behalf of himself or a class for that violation.  The Supreme Court’s decisions in these cases could have broad implications for consumer, workplace, and other class actions, and the rulings will likely apply to numerous federal statutes, including the FLSA and consumer statutes such as the Fair Credit Reporting Act and the Telephone Consumer Protection Act.

Decisions requiring actual injury or rejecting the use of statistical sampling would hamper plaintiffs’ ability to certify classes and likely result in fewer class actions.  Conversely, decisions affirming the court of appeals rulings would likely solidify the importance of the class action and may result in increased filings.  Businesses should continue to monitor these cases closely.  For pending class action litigation, businesses should consider whether to seek a stay until the Supreme Court rules in Tyson and Spokeo.

First off, Happy New Year to our Blog Readers. Thank you for your patronage last year and we look forward to another year rolling over the legal class action landscape together.

As you may have recognized, either in reading our blog or simply reading the paper, a vast majority of the consumer class docket last year across the country was stuffed with cases brought under the Telephone Consumer Protection Act (“TCPA”).  The decisions ran the gamut, from insurance coverage disputes to class certification issues to cy pres conflicts.  The past year also found increased traffic on the administrative side, with nearly a dozen petitions filed with the Federal Communications Commission seeking clarification and assistance in restraining the proliferation of class action litigation under the TCPA.  These petitions seek guidance on the hottest topics being litigated, including: (1) what constitutes an autodialer; (2) whether informational cell phone calls require prior written consent; (3) whether the Act applies to documents transmitted via the Internet; and (4) whether opt-out notices are required on faxes sent with prior express consent.

While this statute created a boom for creative plaintiff’s lawyers, its uncontrolled expansion across the country (watch out New York) has become a drain upon not only the defendants to those suits, but small businesses and even the government.  We have unfortunately witnessed at our firm lawsuits targeting “mom and pop” businesses, apparently brought by plaintiffs with hopes of striking gold through an insurance policy without exclusions.  Further, the Wall Street Journal reported last November that the TCPA has hindered the federal government from efficiently recovering approximately $120 million in unpaid taxes.

Fresh off the New Year, two separate cases are postured to allow the United Supreme Court to address several of pressing issues under the TCPA, as well as to perhaps add some common sense to the interpretation of the statute, as Judge Benitez of the Southern District did late last year.   See Chyba v. First Financial Asset Management, 12-cv-1721 (S.D.N.Y. Nov. 20, 2013).

First, in Turza v. Holtzman, the defendant has petitioned the United States Supreme Court on several bubbling issues, one of which, the availability of cy pres, may be enough to pique the interest of the sitting justices.  Turza is an attorney who sent facsimiles to a purchased list of contacts.  The faxes took the form of a newsletter called the “Daily Plan-It”, which provided industry news and generic legal advice to the recipients.  The bottom portion of the fax provided contact information for Turza.  The lower court found that the faxes were unsolicited advertisements and entered judgement against Turza for $4.2 million, ordering that 1/3 of that amount, or $1.4 million, be paid to the plaintiff’s counsel, with the remaining money constituting a common fund.  Any moneys not claimed, the court held, would be then paid to a cy pres legal aid clinic.  On appeal, the Seventh Circuit upheld the judgment, but remanded to the lower court, taking issue with the designation of the judgment as a common fund, as well as the cy pres designation, but, nonetheless, ordering the solo practitioner to turn over the $4.2 million in a court-maintained account until resolution of the issue on remand.  Turza has now appealed the decision to the United States Supreme Court, challenging not only the issues of the common fund and cy pres, but also the underlying decision related to the designation of the facsimile as an advertisement.  The petition is pending on the United States Supreme Court docket as Case No. 13-760.

Second, in Uesco Industries Inc. et al. v. Poolman of Wisconsin Inc, the plaintiff is seeking a direct appeal to the United States Supreme Court on denial of its motion for class certification.  In Uesco, the defendant was solicited by a marketing agency to utilize the services of that company to send facsimiles.  Ultimately, the defendant acquiesced, but provided explicit instruction on the types of industries it wanted to target.  According to the defendant, against those wishes, the marketing agency sent facsimiles to a larger group of companies, including the plaintiff.  Before the lower court, the defendant argued that no vicarious liability could attach to it, as the marketing company exceeded the scope of its authority.  On appeal, the First District reversed, holding that the express language of the statute, and controlling precedent, required the agent to act within its scope before the defendant could be liable under the TCPA.  The petition is on the United States Supreme Court’s docket as Case No. 13-771.

The new year brings new hope that somewhere, someone will add a pound of sense to the Cerberus-like statute.  In the meantime, we will continue to assist our clients in avoiding the many pitfalls the statute presents, as well as identifying creative solutions to resolving pending litigation.

“Injury-in-fact is not Mount Everest,” Supreme Court Justice Samuel Alito once opined. The threshold to establish constitutional standing — which requires that plaintiffs establish an “injury-in-fact” — is low; so low that in most types of lawsuits, plaintiffs have no trouble scaling the requirement.  While standing may not be Mount Everest, in consumer privacy lawsuits, particularly those involving internet privacy, it can be more than a molehill.  Indeed, in some cases, plaintiffs alleging harm based on alleged privacy violations have found standing to be an insurmountable defense.  In particular, plaintiffs bringing claims based on the online collection, sharing, or dissemination of their personal information without more have been unable to show any “actual or imminent” harm (rather than purely speculative or possible future injury) from the allegedly unlawful conduct.  See e.g., In Re Iphone Application Litig., No. 11-MD-2250, 2011 U.S. Dist. LEXIS 106865 (N.D. Cal. Sept. 20, 2011) (granting defendant’s motion to dismiss for lack of Article III standing).

Are privacy violations sufficient to constitute an injury-in-fact under the Fair Credit Reporting Act (“FCRA”)?  This is one of the nuanced issues that the Ninth Circuit is pondering in connection with the appeal in Robins v. Spokeo, Inc., No. 11-56843 (9th Cir. 2012)Although Judges Diarmund O’Scannlain, Susan P. Graber or Carlos T. Bea likely should base their ruling on narrow, well-settled standing principles, it is possible that they may stretch the concept of standing under the FCRA to include harm resulting from violations of privacy interests.

Proceedings At The District Court Level

Spokeo is a website that describes itself as an aggregator of information.  Unlike traditional search engines like Yahoo!, Google, or Bing, Spokeo’s search engine focuses on finding people.

Spokeo issues prominent disclaimers to users that it is not a consumer reporting agency.  See Spokeo, No. 11-56843, ECF No. 26 (Brief of Appellee Spokeo, Inc.), at 4-6.  It also requires users to agree that information they obtain from Spokeo cannot “be considered for purposes of determining a consumer’s eligibility for credit, insurance, employment, or for any other purpose authorized by the FCRA.”  See id.  Nevertheless, Plaintiff claims Spokeo is a consumer reporting agency as defined under the FCRA.  In fact, he contends that Spokeo not only “assembles” data from a variety of sources, it also creates data not available from other sources, including information that allegedly bears on individuals’ economic wealth and purported creditworthiness.  See Spokeo, No. 11-56843, ECF No. 8 (Appellant’s Opening Brief), at 8.

Plaintiff filed a complaint against Spokeo for violation of the FCRA, arguing that the “reports generated by Spokeo.com contain inaccurate consumer information that is marketed to entities performing background checks.”  According to Plaintiff, Spokeo’s search results stated that Plaintiff had more education and professional experience that he actually has, stated he was married when in fact he is not, and inflated his financial position.  Though the inaccuracies favored Plaintiff, he allegedly was concerned that Spokeo’s search results would affect his ability to obtain credit, employment, or insurance.

Spokeo moved to dismiss the complaint for lack of standing.  After flip-flopping on the standing issue, the district court ultimately agreed with Spokeo.  Initially, Plaintiff argued that a statutory violation (i.e., FCRA violation) is sufficient to constitute an injury-in-fact.  But because the district court was unconvinced (it granted Spokeo’s first motion to dismiss), Plaintiff added allegations to his amended complaint that Spokeo’s dissemination of inaccurate information about him caused him actual harm in the form of diminished employment prospects, as well as anxiety, stress, and concern.  The district court initially accepted these allegations as sufficient and denied Spokeo’s second motion to dismiss but when Spokeo sought interlocutory appeal the district court dismissed the Plaintiff’s amended complaint.

Issues On Appeal

In this post, we focus on the standing issues raised in the Spokeo case.  However, we note that Plaintiff in this case is pushing the envelope on other arguments as well: he is alleging that Spokeo, an internet search engine, is a consumer reporting agency, and he is arguing that Spokeo is not entitled to a defense that it is an “aggregator” merely passing through publicly available information and, thus, immune from FCRA liability.

On appeal, the Plaintiff urges the Ninth Circuit to find standing and revive his complaint. According to Plaintiff, Article III’s requirements are met when a plaintiff alleges a statutory violation where the statute creates legal rights.  Borrowing from arguments plaintiffs have made (with limited success) in internet privacy cases, he argues, the injury-in-fact is the statutory violation itself and not the harmful consequences that may ultimately result.  Plaintiff claims that the FCRA is a “privacy statute designed to protect consumers from unlawful or inaccurate dissemination of their confidential consumer credit information.” Even if the FCRA required actual harm, according to Plaintiff, the harm at issue here is the “invasion of consumer’s right of privacy” arising from Spokeo’s dissemination of inaccurate information that arguably bears on creditworthiness even absent any allegations of a specific economic injury.  Thus, Plaintiff claims he adequately alleged an injury because Spokeo violated Plaintiff’s FCRA rights to be free from inaccurate dissemination of consumer information.

Spokeo counters that the concept of standing is a “screen” that is meant to limit the individuals who can enforce statutory and regulatory requirements.  It contends that although the FCRA creates a cause of action for statutory damages, only those individuals who can establish a concrete injury (actual harm) have standing to pursue a cause of action.  Spokeo points out that Plaintiff failed to allege any consequence resulting from Spokeo’s allegedly harmful conduct; and although he is concerned that incorrect information appears in a Spokeo search might affect his job prospects, he alleges no facts to substantiate his concern.

Implications

Defendants can be on the hook for millions of dollars in consumer class actions filed in the wake of data breaches or other privacy violations.  Given the stakes, standing arguments have been a primary defense in internet privacy class actions.  However, in some privacy cases, courts have held that plaintiffs have standing by virtue of asserting claims under certain statutes, such as those that provide civil relief to persons whose electronic communications are intercepted or accessed without their authorization.  In Spokeo, the Plaintiff is attempting to advance a similar argument to assert standing under the FCRA.  It remains to be seen whether the Ninth Circuit will accept this argument and in so doing lower the standing bar so much so that it is no more than a speed bump for FCRA plaintiffs.

A growing trend in TCPA litigation is for plaintiffs to bring putative TCPA class actions based on telephone calls that were meant for a third-party who actually provided consent for the call.   In a strongly worded opinion, Judge Virginia M. Kendall of the Northern District of Illinois recently dealt a blow to one such attempt by refusing to reconsider her denial of plaintiff’s motion for class certification due to issues with the putative class representative’s credibility and his inability to establish that the issue of consent was suitable for class treatment.  Jamison v. First Credit Services, Inc., et al.  No. 12-4415 (N.D. Ill. July 29, 2013).

Background

Plaintiff Kofi Jamison, a convicted felon, filed a putative class action based on phone calls made to his cellular telephone number in an attempt to collect a debt owed by his sister to American Honda Finance Corporation (“Honda”).  (Slip Op. at 1).  The debt collectors used by Honda (together with Honda, “Defendants”) performed a skip trace on Plaintiff’s sister, which yielded Plaintiff’s phone number, likely because his mother, not Plaintiff, was the named account holder.  (Slip Op. 1, 6-7).

Plaintiff sought to certify a class of “(1) all persons in the United States (2) to whose cellular telephone number (3) [Defendants] placed a non-emergency telephone call (4) using an automatic telephone dialing system  or an artificial or prerecorded voice (5) within 4 years of the complaint (6) with respect to a debt allegedly owed to [] Honda (7) where [Defendants] obtained the cellular telephone that was called via skip trace methods.”  Jamison v. First Credit Servs., Inc., 290 F.R.D. 92, at *30-32 (N.D. Ill. Mar. 28, 2013).

On March 28, 2013, the court denied Plaintiff’s motion for class certification.  First, the Court found that Plaintiff would not be an adequate class representative because he had been convicted of a felony charge for access device fraud and therefore lacked credibility.  Id. at *35-38.  The potential for a jury to find that Plaintiff was not credible was heightened by the fact that he may not have suffered any monetary loss in connection with the calls because it appeared that his mother was the subscriber to the number called and therefore may have paid the bills.  Id.  Thus, “[t]he jury could reasonably conclude that Jamison is a convicted fraudster who is seeking a windfall in litigation despite the fact that he never suffered any monetary loss.”  Id. at *38.

Second, Plaintiff could not establish that common questions of law or fact predominated because many of the individuals within the proposed class had provided their cellular telephone to Honda when financing a vehicle purchase and therefore had consented to receive calls from it.  Id. at *39-48.  Honda would be required to undertake a labor intensive review of their internal business records to determine which proposed class members had provided the number at issue.  Id.

Third, the Court found that the proposed class was not ascertainable because it contained thousands of people who likely provided their cellular telephone number to Honda and therefore had no valid claim under the TCPA.  Id. at *49-50.  While Plaintiff attempted to modify the class definition to exclude such people, the Court found that the class would still not be ascertainable because the numbers called by Defendants may have been reassigned within the four year class period.  Id. at *52-53.  Therefore, “[t]he current subscribers of the cellphone numbers that were called over that period are likely not to be the same people as who were the subscribers when the calls were made.”  Id.

Opinion on Motion for Reconsideration

Rather than appealing the Court’s ruling, Plaintiff filed a motion for reconsideration.  Plaintiff argued that it was a mistake for the Court to consider the fact that his mother may have paid the bills and been the named account holder.  (Slip Op. at 5-6).  The Court disagreed, explaining that the TCPA only provides a cause of action for an individual who was the “called party,” which has been defined by the Seventh Circuit to mean “the person subscribing to the called number at the time the call is made.”  (See Slip Op. at 5-6 (citing Soppet v. Enhanced Recovery, Co., LLC, 679 F.3d 637, 640 (7th Cir. 2012))).  Because the subscriber is “the person who pays the bills of needs the line in order to receive other calls,” id. at 8, the Court ruled that whether Plaintiff or his mother actually paid the bills and whether Plaintiff suffered a monetary loss was a relevant consideration.

Plaintiff also argued that the Court erred in determining that common issues did not predominate because other district courts have certified classes that use a similar definition as the one proposed by Plaintiff and the Court inappropriately required Jamison to prove the merits of his case at the class certification stage.  (Slip. Op. 9-11 & n. 6).  The Court ruled that these arguments were not a valid basis for reconsideration.

The Court explained that “a determination of whether a class is certifiable for an alleged violation of the TCPA turns on the unique facts of each case.”  (Id. at 12).  Because Defendants had presented specific evidence showing that many of the putative class members had provided consent and because Plaintiff had failed to “articulate[] a method of employing generalized proof by which a court or jury could determine whether potential class members gave their consent,”  the Court was correct in determining that individual issues predominated.  (Id.)  Plaintiff could not cure this issue by excluding all putative class members whose phone numbers appeared in Honda’s business records because “it merely replaces one predominance problem with another.  Instead of conducting mini-trials to determine whether potential class members provided consent to Honda to be called on their wireless phone numbers, the Court would now be required to determine if each class member’s wireless number appeared in Honda’s records.”  (Id. at 14).

In regard to ascertainability, Plaintiff argued, that the Court was incorrect in focusing on the fact that a large number of the putative class members’ claims could be barred by an affirmative defense.  (Id. at *16).  Again, the Court rejected Plaintiff’s argument, ruling that where a putative class contains “a large number of potential members who have ‘no grievance’ with the defendant,” regardless of whether this was due to an affirmative defense or the plaintiff’s inability to meet an element of his claim, the class was not ascertainable.  (Id.)

Implications

The Court’s decision in Jamison illustrates the inherent difficulty of utilizing a putative class representative who received a telephone call from a business that intended to call someone else.  This is particularly true where the proposed class includes many individuals who voluntarily provided their cellular telephone number to the defendant and therefore arguably gave defendant their consent to be called.  In order to prevail on the issue of predominance in such cases, defendants must offer specific proof of consent at the class certification stage, not mere speculation.

Jamison also raises a standing issue – whether the plaintiff was the “called party” within the meaning of the TCPA – that could be used to weed out class representatives.  Parties are advised to request information during discovery in order to determine whether the named plaintiff is the subscriber to the number at issue.

We will continue to monitor developments at the circuit and district court level on these issues and keep you posted on new decisions of import.