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2016 Mitigating Risk: Key Litigation Developments

Consumer Class Actions >> Our Best Offer: Rule 68 and TCPA Class Actions

April 5, 2016

The Telephone Consumer Protection Act (TCPA) imposes significant restrictions on automatically dialed calls, including prohibitions against virtually all automated calls and text messages to cell phones. The TCPA also offers recoveries of $500 per violation, and $1,500 for a willful violation. It is not surprising, therefore, that plaintiffs have been filing more and more class actions under the TCPA in recent years.

Recent Federal Communications Commission (FCC) rulings that “automatic telephone dialing systems” (ATDS) include devices that merely have the future (as opposed to the current) capacity to dial random or preselected lists of phone numbers, and that human intervention in an ATDS’s calling process will not protect the caller if the device qualifies as an ATDS, likely will encourage even more TCPA litigation.

One procedural tactic for defending TCPA class actions that had gained momentum in recent years was the “offer of judgment” under Federal Rule of Civil Procedure 68, where a defendant offers the plaintiff judgment on specified terms and, if the plaintiff rejects the offer and obtains a less favorable judgment, the plaintiff will be liable for costs incurred by the defendant after the offer was made. Some courts had ruled that an unaccepted Rule 68 offer of all relief available to the individual plaintiff moots a class action if made prior to certification of a class.

In January 2016, the U.S. Supreme Court limited the utility of the Rule 68 offer as a settlement tactic in TCPA class actions. In the case before the Court, an ad agency engaged in a mobile marketing campaign for the U.S. Navy. One individual who received an unauthorized text message sued the agency. The agency offered the plaintiff a judgment of $1,503 for each call he had received, all reasonable costs he would have recovered if he had prevailed, and an injunction prohibiting the agency from repeating the alleged wrongdoing. The plaintiff did not accept the offer and the agency moved to dismiss the case as moot. The Supreme Court held that an unaccepted offer of judgment did not moot the plaintiff’s case.

The Court declined to address whether a defendant might be able to moot a case by actually depositing the full amount of the plaintiff’s claim with the court and by having the court enter judgment in that plaintiff’s favor. And in March 2016, a federal court in New York ruled that this approach indeed mooted a TCPA class action. In that case, the defendant deposited $1,503, plus $400 in court costs, with the clerk of court and then moved for judgment in the plaintiff’s favor. The court granted the motion and held that the class action had become moot.

Takeaways

  • With statutory penalties of up to $1,500 per call, the cost of a single campaign that violates the TCPA — even inadvertently — can be staggering.
  • Firms that use telemarketing, text messaging, or other similar methods of communication should continue to be vigilant in regularly reviewing their practices to ensure that they comply with the TCPA and the FCC’s rules.
  • Companies that receive TCPA class action claims still can consider making an early settlement offer to the named plaintiff, and even depositing a payment to that plaintiff with the court. If the plaintiff’s counsel lacks a suitable replacement for the named plaintiff, depositing payment with the clerk that extends full potential relief to that named plaintiff may moot the case and undermine the class action.