Antitrust Law Daily Wrap Up, PRIVACY—IllAppCt: Four-Year Federal Statute of Limitations Applies to Telephone Consumer Protection Act Claims, Not Two-Year Illinois Statute, (Feb 5, 2013)

By Tobias J. Gillett, J.D., LLM.

Illinois state courts must apply the federal four-year catchall statute of limitations to Telephone Consumer Protection Act (TCPA) claims, rather than the two-year Illinois statute of limitations for actions for statutory penalties, the Illinois Appellate Court in Elgin has ruled (Wellington Homes, Inc. v. West Dundee China Palace Restaurant, Inc., February 4, 2013, Zenoff, K.).

Wellington Homes, Inc., an Illinois corporation, filed a class action complaint against an Illinois restaurant, West Dundee China Palace Restaurant, Inc., alleging that the restaurant had sent the members of the class an unsolicited fax advertisement in violation of the TCPA. The trial court certified the class, but the restaurant filed a motion to dismiss, arguing that Illinois’ two-year statute of limitations for actions for statutory penalties applied to the TCPA claims.

The trial court certified two questions for interlocutory appeal: “(1) Does Illinois’ two-year limitations period for a statutory penalty apply to TCPA claims brought in Illinois state courts seeking statutory damages pursuant to [the TCPA]?” and “(2) If not, what limitations period applies to TCPA claims brought in Illinois state courts?”

The appeals court began its analysis by explaining that the TCPA permits a plaintiff to bring an action in state court “if otherwise permitted by the laws or rules of court of” the state. The court noted that the U.S. Supreme Court, in its 2012 decision in Mims v. Arrow Financial Services, LLC, 132 S. Ct. 740, had recently concluded that the federal and state courts had concurrent jurisdiction over private TCPA claims.

The Illinois Supreme Court also interpreted the provision in 2011, in Italia Foods, Inc. v. Sun Tours, Inc., 2011 IL 110350. The court in that case found that the provision merely “acknowledged well-established supremacy clause jurisprudence” under which states may apply their own jurisdiction and procedure rules to TCPA claims, rather than adopting the opt-in approach, under which states must opt-in to the TCPA before individuals can bring private TCPA claims. The court did not address the opt-out approach, under which states would have to specifically prohibit private TCPA claims, because the parties did not raise that issue.

The appeals court rejected the restaurant’s contention that the Illinois Supreme Court’s “acknowledgement” approach required application of the Illinois statute of limitations. The court observed that state courts must hear federal claims unless the claim was barred by “a neutral state rule regarding the administration of the court,” and then only if the neutral state rule is not preempted by federal law. In addition, for Supremacy Clause purposes, “federal limitations periods generally are considered components of federal law that must be followed when entertaining federal causes of action.” The court declined to follow Belleville Toyota, Inc. v. Toyota Motor Sales, Inc., 199 Ill. 2d 325 (2002), which had stated that “[s]tatutes of limitations are procedural,” because the Illinois Supreme Court had decided that case “in the context of a choice-of-law analysis” rather than a Supremacy Clause analysis.

The court also declined to adopt the restaurant’s position that the Supreme Court in Mims had endorsed the “opt-out” approach by stating that “Congress arguably gave States leeway they would otherwise lack to decide for [themselves] whether to entertain claims under the [TCPA].” The court pointed out that the Supreme Court had not “engag[ed] in a full analysis of the proper interpretation of the statutory language,” and the issue of whether states could opt out of the TCPA had not been before the Court. The court concluded that the Mims Court’s holding that the TCPA is a federal law to be treated like any other federal law for federal question jurisdiction purposes “support[ed] the conclusion that, as with any federal law enforced in state court pursuant to the supremacy clause, a federal limitations provision provided by Congress must be applied, absent an unambiguous direction to the contrary.” Moreover, the court concluded that, even if the opt-out approach had applied, Illinois’ 1982 statute of limitations did not constitute a decision to opt out of the 1991 TCPA.

The court proceeded to address the restaurant’s argument that, since the TCPA did not specify an applicable limitations provision, the court should borrow the analogous state statute, in this case the two-year Illinois statute. The court noted that Congress had “essentially abolished the practice of limitations borrowing for actions arising under federal statutes enacted after December 1, 1990” in enacting a federal catchall statute of limitations. Therefore, the issue to decide was “whether Congress intended for the federal catchall statute of limitations to apply to private claims under the TCPA.”

The court noted a split in authority among state courts regarding whether the federal statute of limitations or a shorter state statute applied. The courts concluding that the federal statute applied had relied on the U.S. Supreme Court’s 2004 decision in Jones v. R.R. Donnelly & Sons Co., 541 U.S. 369, which had concluded that the federal statute “applie[d] to any cause of action that is ‘made possible by a post-1990 enactment.’” The Jones Court had justified its broad interpretation of the federal statute by referring to the federal courts’ difficulties with limitations borrowing, which included determining which state statute applied and interpreting the statute to determine when an action was commenced or a limitations period tolled.

On the other hand, the courts finding that a state statute applied cited a portion of the federal limitations statute stating it applied “[e]xcept as otherwise provided by law,” referred to the TCPA’s “if otherwise permitted by the laws or rules of court of a state” language, and “concluded that a state statute of limitations is one such rule that may bar the enforcement of a private TCPA claim.”

The court determined that the courts that had applied the federal statute had the better argument. The court criticized what it saw as the state limitations courts’ tendency to overlook Supremacy Clause case law that suggested that a federal statute of limitations should be applied because the statute would “so intimately affect recovery or non-recovery” under a federal right of action. Those courts also ignored the facts “that the Supreme Court has never held that a state statute of limitations falls within the category of a ‘neutral state rule regarding the administration of the courts’” and that the Supreme Court had repeatedly found federal limitations periods applicable to federal claims brought in state courts, in the court’s view.

Moreover, those cases did not explain why the TCPA’s language would encompass state statutes of limitation not specifically directed at TCPA claims, or “why Congress would not have intended” the federal limitations statute applying to statutes enacted after December 1, 1990, “to apply to private claims brought under the TCPA, which was enacted in 1991.”

Instead, the court found the decisions applying the federal statute to be “persuasive.” The court noted that Congress was aware of the 1990 statute of limitations when it enacted the TCPA in 1991, and could have provided that it would not apply to the TCPA, but did not do so. Moreover, the court concluded that the Illinois Supreme Court’s Italia Foods interpretation of the TCPA’s language was “simply an acknowledgment of well-established supremacy clause jurisprudence,” and the fact that “a state court enforcing federal law pursuant to the supremacy clause generally must apply a federal statute of limitations where Congress has provided one,” compelled the court “to conclude that Illinois state courts must apply the four-year federal catchall statute of limitations to private TCPA claims.”

The case is No. 09-CH-1577.

Attorneys: Brian Wanca (Anderson & Wanca Law Office) for Wellington Homes, Inc. Edward Grossi (Law Offices of Edward Grossi) for West Dundee China Palace Restaurant, Inc.

Companies: Wellington Homes, Inc.; West Dundee China Palace Restaurant, Inc.

Cases: Privacy IllinoisNews