TCPA Tracker for April - June 2024

Cases of Note

Eleventh Circuit Dismisses $35M Settlement Due to Class Action Attorneys’ Self-Dealing

The United States Court of Appeals for the Eleventh Circuit dismissed a $35 million settlement of a class action alleging that GoDaddy​.com violated the TCPA when sending unsolicited texts because class counsel engaged in self-dealing, and the lower court abused its discretion in approving the settlement.

Under the settlement agreement, according to the Court, the named plaintiffs would receive ​“preferential treatment” and class counsel would be guaranteed attorney’s fees of up to $10.5 million. Their fees would not be reduced even if the class members’ claims totaled more than the $35 million settlement (less the fees, administration costs, court costs, and service fees). The agreement included a release provision that released GoDaddy and its connected entities, which bound about 98.1% of the class, effectively 1.26 million members. The Court took issue with this release. If class members failed to opt out, the Court stated that they ​“would receive absolutely nothing in exchange for giving GoDaddy overbroad releases.” In addition, the opt-out provision required class members to mail a letter complying with specific opt-out instructions, which the Eleventh Circuit doubted members would actually take the time and effort to compose.

The Eleventh Circuit panel chastised Class Counsel for effectively representing only themselves and GoDaddy—not the absent class members—in light of Class counsel’s request for $10.5 million in attorney’s fees.

The Eleventh Circuit held that the lower court abused its discretion in approving the settlement because it erroneously concluded that the settlement was fair, reasonable, and adequate; overlooked evidence of collusion in the settlement agreement between Class Counsel and the defendant’s attorneys; treated the settlement as a common fund when it was claims-made; and erroneously concluded the deal wasn’t a coupon settlement, which prompted the miscalculation of attorney’s fees.

The panel noted a number of issues it had with the lower court’s decision, and wrote that the lower court should have noted the inference that the “[s]ettlement [a]greement was deliberately structured . . . to ensure that no class members would opt out and the entire class would therefore be bound by . . . [the] release provisions.” In attempting to cure the release provision, the lower court rewrote the agreement by amending the release provision in a material way, which was beyond the scope of its judicial role. Instead, the lower court should have followed precedent by denying the proposed settlement and Class Counsel’s motion for attorney’s fees. The lower court also erred in finding that absent class members’ representation was adequate, despite a conflict of interest, because it neither adopted the role of a skeptical client nor critically examined the settlement terms.

The panel also faulted the lower court for not finding that the settlement agreement was the product of collusion. As the fiduciary for the absent class members, the lower court was required to exercise careful scrutiny to guard against settlements that may benefit the class representatives or Class Counsel at the expense of absent class members—especially when Class Counsel moves for an award of attorney’s fees. The panel found that the lower court failed its obligation to ensure the absent class had the chance to advocate for its own best interests, which required fully and fairly vetting Class Counsel’s motion for attorney’s fees.

The panel also found that the lower court erroneously concluded that the settlement was a not a coupon settlement under the Class Action Fairness Act (CAFA). When there is a recovery of coupons, the coupon settlement triggers CAFA, which governs the award of attorney’s fees to Class Counsel. Though the word ​“coupon” is not defined in CAFA, the Eleventh Circuit used its plain meaning during CAFA’s enactment in 2005, which was ​“a voucher, certificate, or form that can be exchanged for one or more goods or services, or for a discount on one or more goods or services.” Here, the class members could choose between a $35 cash award or a $150 voucher for GoDaddy’s products and services. The Eleventh Circuit held the $150 voucher awards were coupons because “[t]hey are credits redeemable for GoDaddy’s products and services . . . it is something that is not cash but can be exchanged for some or all of a product.”

Because the panel concluded that the settlement was in fact a coupon settlement under CAFA, it held that the lower court miscalculated the attorney’s fees. Attorney’s fees for coupon settlements under CAFA can be ​“based on the value of the coupons that are redeemed, the lodestar method, or a combination of both.” The panel found that the lower court used the wrong legal standard because it calculated the attorney’s fees ​“as a percentage of the possible relief available to class members.” Therefore, the Eleventh Circuit dismissed the settlement because the lower court abused its discretion in approving the agreement.

Drazen v. Pinto, 101 F.4th 1223 (11th Cir. 2024).

Washington Court Holds Informational Text Messages Confirming Commercial Transactions are not ​“Telephone Solicitations”

The United States District Court for the Western District of Washington granted Defendant Walmart Inc.’s Motion for Summary Judgment because informational text messages, merely confirming completed commercial transactions, are not ​“telephone solicitations” under the TCPA.

In 2021, Plaintiff Nathen Barton registered his newly assigned phone number on the Do Not Call Registry. Unbeknownst to him, he alleged, the prior subscriber of that number consented to receiving text updates about her Walmart orders. While some updates were about an item being out for delivery or arriving, others were about an item being unavailable or low in stock, which included a link for substitution preferences. When Walmart continued to send text updates to that number after it had been reassigned, Plaintiff brought suit.

Under the TCPA, a text solicitation is ​“the initiation of a telephone call or message for the purpose of encouraging the purchase . . . of . . . goods, or services, which is transmitted to any person . . . .”

Plaintiff alleged that the text messages about substitution preferences, which included links, are ​“telephone solicitations” because the offering of substitutions were offers of goods and services. Plaintiff further argued that because Walmart is a for-profit entity, all its actions, including text messages, are at least tangentially driven by a profit motive. Thus, this makes their communications commercial in nature.

Walmart asserted that the text messages are not ​“telephone solicitations” but fulfillment updates of its customers’ previously placed orders, for informative purposes only.

The Court agreed with Walmart, holding that Walmart did not send ​“telephone solicitations” because, based on the content and context of its text messages, they were not ​“text solicitations.” Applying a ​“measure of common sense,” the Court found no evidence that Walmart sent text messages to entice Plaintiff to purchase anything. The Court also noted that a text message with a link to a company’s website, without more, does not render the text message a ​“telephone solicitation.”

Barton v. Walmart Inc., 2024 U.S. Dist. LEXIS 64847, 2024 WL 1533579 (W.D. Wash. Apr. 9, 2024).

Texas Court Enforces Class Action Waiver and Compels Individual Arbitration

The United States District Court for the Southern District of Texas enforced an arbitration agreement, signed by Plaintiff, that waived the right to pursue a class action and dismissed the case because the agreement met all the requirements of a binding contract.

Plaintiff Radley Bradford obtained dental services from Defendant Brident Dental Services, LLC, and executed a binding arbitration agreement that included a class action waiver. Brident’s business model included sending text messages concerning dental services, which Plaintiff later opted out of, but continued to receive messages about. Plaintiff brought a class action suit.

The Federal Arbitration Act states that a party is entitled to enforce an arbitration agreement if there is a valid agreement to arbitrate and the dispute falls within the scope of the agreement. If these requirements are met, a court must compel arbitration. Plaintiff disputed only the first element, which is a question of state contract law.

Plaintiff argued that the arbitration agreement never became effective because Brident neither signed the agreement nor delivered the dually signed copy to him. Plaintiff further argued that both parties’ signatures are required to show intent.

Brident argued that Plaintiff’s claims are subject to a binding and enforceable arbitration agreement and class action waiver because Plaintiff signed the arbitration agreement when he obtained dental services.

The Court, following Fifth Circuit precedent, noted that a class action proceeding is not a substantive right. Additionally, language in the arbitration agreement referred to only Plaintiff’s signing of the agreement to give up his right to a jury or court trial, not Brident’s. Thus, since there was no language in the arbitration agreement showing that the parties intended to require both parties’ signatures to create a binding contract and because Plaintiff failed to show that the parties intended the arbitration agreement to be binding only after both parties had signed, the court held there was a valid arbitration agreement.

Bradford v. Brident Dental Servs., LLC, 2024 U.S. Dist. LEXIS 76716, 2024 WL 1839458 (S.D. Tex. Apr. 26, 2024).

Third Circuit Holds ​“List-Mode” Calls Do Not Trigger ATDS Provisions

The United States Court of Appeals for the Third Circuit affirmed the lower court’s dismissal of Plaintiff’s TCPA claim because Defendant did not call Plaintiff using an automatic telephone dialing system (ATDS).

Serial plaintiff Andrew Perrong alleged that the Montgomery County Democratic Committee called him three times. When Plaintiff picked up on the third call, the Committee asked Plaintiff when he planned to vote for their candidates and informed him that the call was paid for by the Committee’s fund. Plaintiff filed suit alleging the calls violated the TCPA because although the Committee had a previously compiled voters list, it still used a number generator when determining the order in which to call phone numbers—which is an ATDS.

Under the TCPA, an ATDS is ​“equipment which has the capacity . . . (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” Here, the Committee’s compiled voter list is a ​“list-mode” call, where the device dials telephone numbers from a customer list.

The Third Circuit held that ​“list-mode” calls do not trigger ATDS provisions in the TCPA. These calls do not ​“threaten the harm the TCPA targets,” like telemarketing that risks (1) dialing emergency lines randomly or (2) tying up all the sequentially numbered lines at a single entity. The Court affirmed the granting of the Committee’s Motion to Dismiss.

Perrong v. Montgomery Cnty. Democratic Comm., 2024 U.S. App. LEXIS 9238, 2024 WL 1651274 (3d Cir. Apr. 17, 2024).

Second Circuit Holds that Texting Phone Numbers from an Index does not Violate the TCPA

The United States Court of Appeals for the Second Circuit upheld the dismissal of a suit claiming that sandwich chain Subway used an automatic telephone dialing system (ATDS) with an artificial or prerecorded voice.

In 2016, Subway sent a text message to Plaintiff offering a free bag of chips with the purchase of a sandwich. Plaintiff responded by texting ​“STOP.” Subway immediately sent another text message confirming that Plaintiff would no longer receive text alerts. Nonetheless, four days later, Subway sent Plaintiff another text regarding the same deal. Plaintiff sued Subway in the United States District Court for the District of Connecticut for violating the TCPA.

Plaintiff alleged that Subway used an ATDS to send its texts to Plaintiff. Subway’s platform dialed telephone numbers that were stored in a database.

The district court held that Subway’s text-messaging system did not constitute an ATDS because Subway sent texts to phone numbers stored in a database, rather than randomly or sequentially generating phone numbers.

The TCPA also prohibits calls that use an artificial or prerecorded voice. The district court held that a text message is not a voice, so Subway’s automated text messages do not violate the TCPA.

The district court dismissed Plaintiff’s claims because it found that Subway did not use an ATDS or an artificial or prerecorded voice. The Second Circuit affirmed the district court’s dismissal.

Soliman v. Subway Franchisee Advert. Fund Tr., LTD., 101 F.4th 176 (2d Cir. 2024).

Fourth Circuit Holds Faxes for Free Webinars can be ​“Unsolicited Advertisements”

The United States Court of Appeals for the Fourth Circuit reversed the lower court’s dismissal of Plaintiff’s TCPA claim because Defendant Pulse8, LLC’s fax inviting Plaintiff to attend a free webinar, which required providing contact information and consenting to receive further promotional materials, was an ​“unsolicited advertisement.”

Plaintiff Family Health Physical Medicine LLC alleged that Pulse8, a healthcare analytics and technology company, sent a fax inviting it to attend a free webinar. The fax encouraged recipients to open their mind to behavioral and mental health coding but did not facially identify Pulse8’s products. To attend the webinar, Plaintiff must provide its contact information and consent to receiving further promotional materials. Plaintiff filed suit alleging the fax violated the TCPA because it was an ​“unsolicited advertisement.”

Under the TCPA, a fax must ​“advertis[e] the commercial availability or quality of any property, goods, or services.” An advertisement is any material that advertises the commercial availability or quality of any property, goods, or services. In Carlton & Harris Chiropractic, Inc. v. PDR Network, LLC (PDR), 80 F.4th 466, 474–75 (4th Cir. 2023), the Court previously held that an ​“unsolicited advertisement” did not include offers without commercial components or purposes.

Plaintiff alleged that the fax was an ​“unsolicited advertisement” because it promoted a webinar relating to Pulse8’s business. Plaintiff also argued that the only way to accept the offer to attend the webinar was by providing its contact information and consenting to receiving further promotional materials, which would trigger future advertising.

Pulse8 argued that the fax was not an ​“unsolicited advertisement” because the webinar was free and did not facially tell recipients about its product or line of business.

The Court held that although a fax, which makes known and calls public attention to the sender’s free webinar, does not, alone, make it an advertisement, the fax was an ​“unsolicited advertisement.” The court also noted that a fax that offers a free webinar is an ​“advertisement” if the recipient cannot accept the offer without providing contact information and consenting to receiving further promotional materials. Although Pulse8’s webinar was free and the fax did not facially tell recipients about its product or line of business, there was still a ​“commercial character.”

Fam. Health Physical Med., LLC v. Pulse8, LLC, 105 F.4th 567 (4th Cir. 2024).