Antitrust Law Daily Wrap Up, PRIVACY—EDNY: New York Law Bars TCPA Class Action Claim in Federal Court, (May 2, 2013)

By Tobias J. Gillett, J.D., LL.M.

An individual bringing Telephone Consumer Protection Act (TCPA) claims in a class action complaint against two companies that allegedly placed telephone calls to the individuals’ phone lines could not obtain reconsideration of a decision dismissing their claims for lack of subject matter jurisdiction, because the Second Circuit’s holding that New York law barred TCPA class actions in federal court had not been overruled by the Supreme Court’s decision in Mims v. Arrow Fin. Servs., LLC, 132 S.Ct. 740 (2012), the federal district court in Brooklyn has ruled (Bank v. Independence Energy Group LLC, May 1, 2013, Kuntz, W.).

A class of individuals brought suit under the TCPA against Independence Energy Group LLC and Independence Energy Alliance LLC, alleging that they placed telephone calls to the individuals’ residential telephone lines using a prerecorded message to advertise the companies’ products. On March 12, 2013, the court dismissed the claims for lack of subject matter jurisdiction. In the present decision, the court addressed the plaintiffs’ motion for reconsideration.

The court explained that the Second Circuit in its 2010 decision in Holster III v. Gatco, Inc., 618 F.3d 214, had held that New York Civil Practice Law and Rules § 901(b) barred TCPA class actions in federal court. The plaintiffs contended that the Supreme Court’s 2012 decision in Mims v. Arrow Fin. Servs., LLC, 132 S.Ct. 740, in which the Court held that "federal and state courts have concurrent jurisdiction over private suits arising under the TCPA," abrogated the Second Circuit’s holding, permitting their class action to proceed. The plaintiffs pointed to language in the opinion stating that (1) "the TCPA is a federal law that . . . supplies the rules that will govern the case;" and (2) "the TCPA furnishes the substantive rules of decision" as supporting this conclusion.

However, the court interpreted those statements as referring to the substantive rules in the TCPA, rather than to the Federal Rules of Civil Procedure. Moreover, the court pointed out that the Supreme Court had only considered the limiting language in the TCPA, which stated that a person could bring an action in state court "if otherwise permitted by the laws or rules of court of a state," as applied to state court actions.

The court observed that the Mims holding did not abrogate the Holster III decision. The Holster III opinion had followed a remand from the Supreme Court in light of the Supreme Court’s decision in Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 120 S.Ct. 1431 (2010), which had held that Section 901(b) was preempted because Federal Rule of Civil Procedure 23 "regulates procedure, not substantive law, and therefore it applies regardless of its incidental effect upon state-created rights."

The Holster III court nonetheless "reaffirmed its conclusion that Section 901(b) prohibits class action suits brought under the TCPA in either New York’s state or federal courts, because the TCPA explicitly limits private actions to those ‘otherwise permitted by the laws or rules of court of a state.’" Therefore, the court in the present case concluded, Mims did not abrogate Holster III "[b]ecause the Holster III holding expressly relied on a statutory interpretation that has not been disturbed." Moreover, the Supreme Court had not considered the Mims action as a TCPA class action, and had not "consider[ed] the interplay between federal and state rules governing TCPA class actions."

The court declined to follow a series of other post-Mims district court opinions that had held "that state procedural rules regulating class actions do not apply to TCPA claims brought under federal question jurisdiction," including the Second Circuit district court opinion in Bais Yaakov of Spring Valley v. Alloy, Inc., 2013 WL 1285408 (S.D.N.Y., Mar. 28. 2013). The Bais Yaakov court held that 901(b) did not prevent a TCPA class action, finding that the Second Circuit would likely depart from its previous jurisprudence and conclude, in light of Mims, "that the TCPA should not be interpreted as requiring a federal court to follow state law."

The present court observed that the Second Circuit "ha[d] not yet so departed," and therefore "Holster III remains the binding law of this Circuit." Moreover, other district court opinions, even from the same circuit, were not binding on the court. Therefore, the court denied the motion for reconsideration.

The case is No. 12-cv-1369 (WFK) (MDG).

Attorneys: Todd C. Bank (Law Office of Todd C. Bank) for Todd C. Bank. Aurora Francesca Parrilla (Lowenstein Sandler PC) for Independence Energy Group LLC.

Companies: Independence Energy Group LLC; Independence Energy Alliance LLC

Cases: Privacy NewYorkNews