Source: http://updates.mwbllp.com/2018_01_07_archive.html
Timestamp: 2019-09-16 08:28:47
Document Index: 634969487

Matched Legal Cases: ['§ 227', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 227']

Financial Services Law Developments: 1/7/18 - 1/14/18
FYI: 9th Cir Rejects Attempt to Hold Lenders Liable for Promoter's Alleged TCPA Violations
The U.S. Court of Appeals for the Ninth Circuit recently affirmed a trial court's judgment in favor of several lender defendants in a putative TCPA class action, ruling that the defendants could not be vicariously liable under the TCPA for a promoter's text messages because the promoter was either not the defendants' agent or the defendants did not have knowledge concerning material facts about the agent's unlawful activities.
In so ruling, the Ninth Circuit held that mere knowledge that an agent is engaged in an otherwise commonplace marketing activity, such as text message marketing, would not lead a reasonable person to investigate whether the agent was engaging in unlawful activities relating to the text messaging.
As you may recall, the federal Telephone Consumer Protection Act (TCPA) makes it "unlawful for any person within the United States, or any person outside the United States if the recipient is within the United States: (A) to make any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system . . . (iii) to any . . . cellular telephone service." 47 U.S.C. § 227(b)(1)(A)(iii).
The Federal Communications Commission (FCC), pursuant to its rulemaking authority under the TCPA, has ruled that "[c]alls placed by an agent of the telemarketer are treated as if the telemarketer itself placed the call," In re Rules & Regulations Implementing the TCPA of 1991, 10 FCC Rcd. 12391, 12397 (1995), and has construed actions under the TCPA "to incorporate federal common law agency principles of vicarious liability," In re Joint Petition Filed by Dish Network, LLC, 28 FCC Rcd. 6574, 6584 (2013).
On December 6, 2011, the plaintiff received an allegedly unwanted marketing text message from the promoter. The promoter had entered into an agreement with a lead generating company to provide leads for three lenders.
The plaintiff did not respond to the promoter's text message or click on the link contained in the text message. Instead, the promoter filed a putative class action against the promoter, the lead generation company, and the three lenders. The plaintiff alleged that the lenders and the lead generation company were vicariously liable under the TCPA for the promoter's text messages.
The trial court granted summary judgment in favor of the lenders and the lead generating company. The trial court rejected the plaintiff's argument that the lenders and the lead generating company had ratified the promoter's texting campaign by accepting leads while knowing that the promoter had used texts to generate those leads. The plaintiff appealed.
On appeal, the plaintiff argued that the lenders and the lead generating company had ratified the promoter's unlawful texting by accepting the benefits of the text messages while unreasonably failing to investigate the promoter's texting methods.
The Ninth Circuit first noted that the FCC had relied on the Restatement (Third) of Agency as the federal common law of agency. And, the Restatement defines "ratification" as "the affirmance of a prior act done by another, whereby the act is given effect as if done by an agent acting with actual authority." Restatement (Third) of Agency § 4.01(1). "Ratification does not occur unless . . . the act is ratifiable as stated in § 4.03." Id. § 4.01(3)(a). An act is ratifiable "if the actor acted or purported to act as an agent on the person's behalf." Id. § 4.03.
The Ninth Circuit also noted that even if a principal ratifies an agent's act, "[t]he principal is not bound by a ratification made without knowledge of material facts about the agent's act unless the principal chose to ratify with awareness that such knowledge was lacking." Id. § 4.01 cmt b.
The Ninth Circuit then rejected the plaintiff's argument that the lenders could be vicariously liable for the promoter's text messages because the promoter had not entered into any contracts with the lenders, had not communicated with the lenders, and did not even know of the lenders involvement prior to the plaintiff's lawsuit.
The Ninth Circuit also affirmed the trial court's rejection of the plaintiff's claims against the lead generating company. The Ninth Circuit found that the plaintiff had not produced any evidence that the lead generating company had actual knowledge that the promoter had sent text messages in violation of the TCPA. In addition, the Ninth Circuit determined that the plaintiff had not offered any basis to infer that the promoter had assumed the risk of lack of knowledge, and did not present any evidence that the lead generating company "had knowledge of facts that would have led a reasonable person to investigate further," but ratified the promoter's acts anyway without investigation. Id. § 4.06 cmt. d.
In so ruling, the Ninth Circuit also rejected the plaintiff's contention that a reasonable person would investigate whether an agent was involved in unlawful activities merely because the agent was engaged in text message marketing.
Posted by Ralph T. Wutscher at 1:06 PM
FYI: Fla App Ct (4th DCA) Holds Trial Court Improperly Applied Federal Judicial Estoppel Rule to Undisclosed Assets in Bankruptcy
The District Court of Appeal of the State of Florida, Fourth District ("Fourth DCA"), recently reversed a trial court's order denying two borrowers' request for attorney's fees and costs on judicial estoppel grounds.
In so ruling, the Fourth DCA held that the trial court improperly relied on a Fifth Circuit case and failed to apply Florida's judicial estoppel doctrine when it concluded that borrowers failure to disclose their attorney's fee claim in their Chapter 11 bankruptcy schedules barred the fee claim.
In 2008, the mortgagee ("Bank") filed a foreclosure action against two borrowers. Subsequently, the Bank voluntarily dismissed the foreclosure without prejudice. In 2011, borrowers moved to tax attorney's fees and costs. In 2012, the trial court granted borrowers' motion and found that borrowers were entitled to their reasonable attorney's fees and costs. If the parties did not agree on the amount of fees, then the trial court indicated it would conduct an evidentiary hearing to set the reasonable amount of fees.
In 2013, the borrowers filed a Chapter 11 voluntary bankruptcy petition. The petition's bankruptcy schedules required the borrowers to disclose the value of all personal property. This included contingent and unliquidated claims, The borrowers did not list any contingent claim assets. In 2014, the bankruptcy court confirmed borrowers' reorganization plan. As it was a Chapter 11 bankruptcy, the reorganization plan did not discharge borrowers' debts.
In September 2016, the Bank moved to vacate the fee entitlement order. The Bank argued that judicial estoppel barred the fee claim because the borrowers did not disclose their entitlement to attorney's fees and costs as a contingent and unliquidated asset in their bankruptcy. The Bank also argued that judicial estoppel barred borrowers from recovering attorney's fees in the foreclosure because the borrowers took inconsistent positions in the bankruptcy court and the foreclosure court.
In response, the borrowers argued that judicial estoppel did not apply because the Chapter 11 bankruptcy did not discharge their debts. Without a discharge, the borrowers argued they did not prevent their creditors from collecting any amounts owed and therefore did not prejudice the creditors. The borrowers also argued that they did not intentionally attempt to conceal assets because did not know that attorney's fees constituted an asset.
Relying on U.S. Court of Appeals for the Fifth Circuit law, In Re Coastal Plains, Inc., 179 F. 3d 197 (5th Cir. 1999), the trial court rejected the borrowers' "absence of prejudice" argument, finding that when considering how bankruptcy cases impact judicial estoppel, courts apply the doctrine to bankruptcy cases generally. Although the trial court found that borrowers had no motive to conceal their claim, it did not matter whether the omission was inadvertent because the trial court held it had no discretion and had to find that judicial estoppel applied and precluded borrowers' attorney's fees claim. As such, the trial court granted the Bank's motion to vacate the fee entitlement order.
This appeal followed when borrowers filed a petition for certiorari review of the trial court's fee entitlement order. The Fourth DCA issued an order that it would treat the case as a final appeal and decided to hear the case.
The Fourth DCA applies a mixed standard of review for judicial estoppel. The Fourth DCA reviews factual findings in the order for an abuse of discretion and any legal conclusions de novo.
The borrowers argued that the trial court erred when it applied judicial estoppel because it improperly failed to consider the reorganization of their debt versus the discharge of their debt, and because it did not accord sufficient weight to its finding that borrowers' failure to disclose the fee claim in the bankruptcy was inadvertent.
The Fourth DCA observed that "[j]udicial estoppel is an equitable doctrine that is used to prevent litigants from taking totally inconsistent positions in separate judicial, including quasi-judicial, proceedings." Blumberg v. USAA Cas. Ins. Co., 790 So. 2d 1061, 1066 (Fla. 2001). Judicial estoppel therefore "protects the integrity of the judicial process and prevents parties from making a mockery of justice by inconsistent pleadings and playing fast and loose with the courts." Grau v. Provident Life & Accident Ins. Co., 899 So. 2d 396, 400 (Fla. 4th DCA 2005).
The Fourth DCA also found that, as the Florida Supreme Court stated in Blumberg, the position taken in the prior matter "must have been successfully maintained" to apply judicial estoppel. Blumberg, 790 So. 2d at 1066. In addition, "the positions must be clearly inconsistent, the parties must be the same and the same questions must be involved." Id. The party seeking to apply judicial estoppel must have been misled and changed their position. Thus, "[t]here can be no estoppel where both parties are equally in possession of all the facts pertaining to the matter relied on as an estoppel." Id.
Additionally, the Fourth DCA previously declared in Grau that when the parties are identical, a successful claim or position in a former judicial proceeding bars a party from making a completely inconsistent claim or asserting a clearly conflicting position in a subsequent judicial proceeding where it prejudices the adverse party. However, the mutuality of parties requirement is subject to a "special fairness and policy considerations" exception. Id. at 400. Thus, "[t]he prejudice component of judicial estoppel occurs when the party seeking to assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped." Id. at 400 n. 3.
The Appellate Court here held that the trial court erred because it did not properly apply Florida's doctrine of judicial estoppel. The trial court instead relied on In re Coastal Plains, Inc., 179 F.3d 197 (5th Cir. 1999), to conclude that judicial estoppel barred borrowers' entitlement to attorney's fees and costs. The parties did not advise the trial court that "the elements of judicial estoppel under federal law in such cases may not be identical to the elements usually required under state law in Florida." Montes v. Mastec N. Am., Inc., 132 So. 3d 1195, 1198 n.2 (Fla. 3d DCA 2014). Therefore, according to the Fourth DCA, the trial court therefore improperly failed to apply "the Florida judicial estoppel doctrine as iterated in Blumberg and Grau."
The Fourth DCA concluded that two reasons prevent judicial estoppel from precluding borrowers' attorney's fees claim.
First, judicial estoppel does not apply where both parties possess all the material facts pertinent to estoppel. Here the Bank was a creditor in the borrower's Chapter 11 bankruptcy and knew about the fee entitlement order.
Second, the Appellate Court noted, the borrowers' inconsistent position did not prejudice the Bank. The Fourth DCA found that the borrowers did not assert anything in the Chapter 11 bankruptcy inconsistent with the fee entitlement order. Indeed, the trial court found that the borrowers did not have any motive to conceal the fee entitlement order in the bankruptcy proceeding. The Appellate Court therefore found that the borrowers did not intentionally take inconsistent positions to obtain "an unfair advantage in a forum provided for suitors seeking justice." Grau at 401.
Thus, the Fourth DCA reversed the trial court's order vacating borrowers' entitlement to attorney's fees, and remanded the case for further proceedings consistent with its opinion.
Posted by Ralph T. Wutscher at 7:18 PM
FYI: 2nd Cir Affirms Judgment in Def's Favor in TCPA Putative Class Action
The U.S. Court of Appeals for the Second Circuit recently affirmed the entry of judgment on the pleadings against the plaintiff in a putative class action alleging that a text message sent by third party on behalf of a hospital reminding the plaintiff about a flu shot violated the federal Telephone Consumer Protection Act ("TCPA"), holding that the plaintiff provided his prior express consent to receive such messages in a hospital admission form.
The plaintiff went to a medical clinic owned by a hospital for a routine health examination in 2003. He completed several new patient forms, including one that gave consent to the hospital to use his health information "for payment, treatment and hospital operations purposes."
In June of 2011, the hospital contracted with a third party to send mass text messages, "including flu shot reminder texts" on the hospital's behalf. In September of 2014, the plaintiff received a text message advising him that "[i]ts [sic] flu season again" and providing a telephone number to make an appointment for a "flu shot."
The plaintiff sued the clinic and hospital, alleging that the hospital violated § 227(b)(1)(A)(iii) of the TCPA, which "makes it unlawful to send texts or place calls to cell phones through automated telephone dialing systems, except under certain exceptions or with consent."
In December of 2016, the trial court granted the hospital's motion for judgment on the pleadings and dismissed the case. The plaintiff appealed.
On appeal, the Second Circuit explained that "Congress delegated authority to issue regulations under the TCPA to the Federal Communications Commission ("FCC")." The Court then discussed the history of the FCC's TCPA rulemaking, beginning with a 1992 order in which the FCC "concluded that 'persons who knowingly release their phone numbers have in effect given their invitation or permission to be called at the number which they have given, absent instructions to the contrary.'"
The Court went to explain that "[i]n 2008, the FCC extended this proposition to cell phone numbers". Then, in 2014, the FCC clarified that "the scope of [an individual's prior express] consent must be determined upon the facts of each situation."
In addition, the Court explained that "[i]n 2012, the FCC devised a 'Telemarketing Rule' requiring 'prior written consent for autodialed or prerecorded telemarketing calls.'"
However, in the Telemarketing Rule, the FCC exempted from the written consent requirement "calls to wireless cell numbers if the call 'delivers a 'health care' message made by, or on behalf of, a 'covered entity' or its 'business associate,' as those are defined in the HIPPA Privacy Rule. … HIPPA defines health care to include 'care, services, or supplies related to the health of an individual … [and] exempts from its definition of marketing all communications made '[f]or treatment of an individual by a health care provider … or to direct or recommend alternative treatments' to the individual."
The Court then reasoned that although the trial court held that "the text message qualified for the FCC's Healthcare Exception[,]" its "analysis was incomplete." This was because the trial court found that the text message delivered a "health care" message under the HIPPA Privacy Rule, but "it did dot then go on to determine whether [plaintiff] provided his prior express consent to receive the text message."
The Second Circuit, however, nevertheless affirmed the trial court's judgment because after "considering 'the facts of the situation,'" the Court determined that the plaintiff had given his prior express consent to be called and texted when he provided his cell phone number when he first visited the clinic in 2003.
Posted by Ralph T. Wutscher at 4:48 PM
FYI: 9th Cir Rejects Attempt to Hold Lenders Liabl...
FYI: Fla App Ct (4th DCA) Holds Trial Court Improp...
FYI: 2nd Cir Affirms Judgment in Def's Favor in TC...