‘Professional’ robocall plaintiffs and the ‘zone of interest’ defense

August 18, 2016

(Reuters) – I never cease to be amazed at how creatively people use the law to make money. Consider the example of Melody Stoops, a Pennsylvania resident who bought dozens of prepaid cellphones she kept in a shoebox. Stoops activated the phones to be assigned telephone numbers in Florida area codes hard hit by the economic downturn, then waited for credit card companies and debt collectors to call. When her phones received unsolicited calls – basically, the only calls they received since Stoops never gave her numbers to anyone she wanted to hear from – Stoops would log callers’ information.

The whole point, she said at a deposition quoted in a June 2016 opinion by U.S. District Judge Kim Gibson of Johnstown, Pennsylvania, was to collect evidence for litigation under the Telephone Consumer Protection Act, in which unsolicited robocalls can be worth $500 a pop – or $1,500 if you can prove willfulness. “I have a business suing offenders of the TCPA  laws,” Stoops said. “It’s my business. It’s what I do.”

Nor is Stoops, who got the idea from a friend in Nebraska, the only TCPA litigation entrepreneur. As you’ve probably heard, the TCPA – which prohibits certain sorts of spam calls and texts to cellphones and landlines – has become a favorite cause of action for the plaintiffs’ bar. TCPA class actions have multiplied like New York City rats in August, from fewer than 40 in 2009 to nearly 2,500 in 2014. And that doesn’t even count the pre-suit demands consumers assert against businesses in the habit of making unsolicited calls. Plaintiffs’ firms are so enamored of TCPA claims that at least two of them have set up mobile device apps to develop client leads.

The rationale of TCPA entrepreneurs is that Congress empowered private entities to enforce prohibitions on robocalls. They consider themselves private attorneys general, bringing suits that will ultimately force businesses to change practices Congress wanted to discourage when it enacted a law to protect consumers’ privacy. In the early boom in TCPA litigation, judges generally agreed. To cite one notable example, in a 2014 decision in McHenry v. ADT Corporation, U.S. District Judge Donald Middlebrooks of Miami held that a plaintiff who earned $30,000 or $40,000 a year from TCPA claims falls under the law’s “zone of interest,” despite defense arguments that he basically invited robocalls to his six residential phone numbers. (The judge refused, however, to certify a TCPA class against ADT.)

In two recent rulings, both since the U.S. Supreme Court’s befuddling decision in Spokeo v. Robins and one issued just 10 days ago, other federal judges have wrestled anew with the question of whether Congress really meant to enable a cottage litigation industry when it enacted the TCPA. Both judges concluded that repeat TCPA plaintiffs were not the consumers and businesses Congress had in mind when it included a private right of action in the law.

In the Stoops case I described above, Judge Gibson seemed to be bowled over by the plaintiff’s naked admission that her business is suing over spam calls. The judge rejected Wells Fargo’s arguments that Stoops had invited or implicitly consented to the calls. (Of note for spam litigation fans: Judge Gibson distinguished between the Stoops’ use of dozens of pre-paid cell phones and the e-mail trap system at issue Beyond Systems v. Kraft, the 2015 decision in which the 4th U.S. Circuit Court of Appeals said a business designed to attract spam emails cannot turn around and sue for receiving them.)

But Judge Gibson found Stoops did not have constitutional standing to sue under Article III because she hadn’t been injured by the unsolicited calls she received. The TCPA was enacted to protect consumers from privacy violations and any economic consequences of robocalls. According to Judge Gibson, Stoops suffered no injury on either score because she actively welcomed spam calls she could base TCPA claims on. And even if she had constitutional standing, the judge said, her interests are not those TCPA was intended to protect. “It is unfathomable that Congress considered a consumer who files TCPA actions as a business when it enacted the TCPA,” he wrote.

The plaintiff in a TCPA suit before U.S. District Judge Amy St. Eve of Chicago wasn’t exactly like the TCPA entrepreneurs in the cases decided by Judges Gibson and Middlebrooks. Telephone Science Corporation’s main business is selling robocall-blocking services to consumers. But in operating those services, in which TSC filters calls milliseconds before they ring on consumers’ phone lines, the company fields thousands of spam calls. Beginning in May 2015, instead of letting the calls go unanswered, TSC began incurring the tiny expense of answering the spam calls.

TSC has brought five TCPA suits, according to outside counsel David Menditto of Hyslip & Taylor, who told me the litigation is part of the company’s campaign to end robocalls. “This company wears the white hat,” he said. “These calls are unwanted! TSC cleans up dirty phone numbers so they can be re-released to the public.”

Nevertheless, the debt collector Asset Recovery Solutions argued that TSC is a professional TCPA plaintiff whose true motives, like those of Melody Stoops, fall outside the law’s zone of interest. On Aug. 8, in a comprehensive opinion, Judge St. Eve held (unlike Judge Gibson in the Stoops case) that TSC does have constitutional standing to sue – but that it does not have a cause of action because its interest is in collecting data from robocallers to serve its spam-blocking business.

TCPA’s underlying motive is “the principle that a person or business should be free from nuisance robocalls and their associated costs,” the judge said. “TSC did not suffer the injury contemplated by the TCPA – that is, invasion of privacy and/or general nuisance.”

TSC’s lawyers have asked the judge for leave to amend their complaint to show her how the company’s interests align with the law. She hasn’t ruled on the motion. The debt collection agency’s lawyers at Akerman did not respond to my questions about the case.

But at least one TCPA defense firm believes the Stoops and TSC opinions mark a turning point in the litigation. “Most TCPA putative class representatives click their heels with glee when they receive what might be determined to be unsolicited communications in violation of the TCPA, and many of them have established a cottage industry in league with plaintiffs’ class action attorneys to file and collect on (usually via settlement),” wrote Blaine Kimrey of Vedder Price in a post at the National Law Review. “Judge St. Eve’s decision gives those of us on the defense side of the TCPA bar hope that the real motivations underlying these cases will cause judges to declare them outside the zone of interests intended to be protected by the TCPA and thus devoid of statutory standing.”

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