FYI: 9th Cir Affirms Denial of Class Cert in TCPA Action on Ascertainability and Predominance Grounds

The U.S. Court of Appeals for the Ninth Circuit recently affirmed a district court's order denying class certification in a lawsuit alleging violation of the federal Telephone Consumer Protection Act, 47 U.S.C. 227, et seq. ("TCPA"), holding that the "the district court did not abuse its discretion by finding the requirements of Rule 23(b)(3) unsatisfied," and that the "district court appropriately determined that it would be extremely difficult to ascertain the identities of the individuals who had not consented to receive the messages."

A copy of the Ninth Circuit's opinion is available at:  Link to Opinion.  A copy of the district court's order is available at: Link to Opinion

The defendants operate a pay-per-call "phone sex" and "sex text" service.  When calls arrive, the defendants disclose that continuing the call serves as consent to receiving special offers via text messages.  After making this disclosure, the defendants then instruct callers on how to opt-out of any future communications.  A potential customer who fails to opt-out receives a text message from the defendants' automated system within one week of the initial call.  Recipients who fail to opt-out or respond to the first text message receive a second text message approximately one week later.

The plaintiff alleged that he called the defendants' service by accident, and immediately hung up after realizing his mistake.  He also alleged that the defendants sent a text message to his phone approximately three weeks later. Because the plaintiff did not opt-out, he subsequently received a second text message from the defendants.

Filing suit under the TCPA, the plaintiff moved to certify a nationwide class consisting of all consumers that received one or more "unauthorized" text messages from the defendants.  The district court denied the plaintiff's motion, holding that the plaintiff's "proposed class is unascertainable and unidentifiable" and that the plaintiff also failed "to demonstrate that common questions predominate and that class action is the superior method of adjudication under Rule 23(b)(3)."

On appeal, the Ninth Circuit held that district court correctly determined that the plaintiff failed to meet the predominance and superiority requirements under Rule 23(b)(3).  

Under Rule 23(b)(3), a class can only be certified where "questions of law or fact common to class members predominate over any questions affecting only individual class members." Fed. R. Civ. P. 23(b)(3). These common questions must be a "significant aspect of the case" that can be determined for each class member in a single adjudication. See Berger v. Home Depot U.S.A., 741 F.3d 1061, 1068 (9th Cir. 2014).  In addition, a putative class plaintiff must demonstrate that "a class action is superior to other available methods for fairly and efficiently adjudicating the controversy."  Fed. R. Civ. P. 23(b)(3).

The Ninth Circuit explained that the "central issue" involved was whether each putative class member received unauthorized text messages. As the district court found, however, reaching this determination would require myriad individual inquiries into whether each class member: (1) called into the defendants' service purposefully or by accident;  (2) saw any advertisements disclosing the defendants' text messaging practices;  (3) heard the disclosure about the defendants' text messaging practices during the initial phone call; and  (4) attempted to opt-out of receiving text messages from the defendants.

Faced with these significant uncommon questions, the Ninth Circuit held that the district court did not abuse its discretion in finding that the plaintiff failed to demonstrate that common questions predominate, as required under Rule 23(b)(3).

For similar reasons, the Ninth Circuit agreed with the district court's finding that it would be "extremely difficult" to ascertain the identity of potential class members.

The district court explained that, although not explicitly referenced in Rule 23(a), a proposed class definition must provide an "administratively feasible" means of identifying class members without delving into the merits of the case.

The plaintiff's proposed class definition, however, consisted only of those who received "unauthorized" text messages. In light of the defendants' disclosure and opt-out procedures, the district court would necessarily have to conduct individual inquiries as to whether each potential class member consented to receiving the text messages at issue.  This would "render the proposed class not ascertainable or identifiable, because significant inquiry as to each individual class member would be required, as well as inquiry into the merits of the claim."  Stated differently, the trial court "would have to hold 'mini-trials' to determine who received unauthorized text messages and thus, who is a class member," in a process that be unmanageable. 

As a result, the Ninth Circuit held that the district court did not abuse its discretion in holding that the proposed class members were not "readily ascertainable."

Accordingly, the Ninth Circuit affirmed the district court's order denying the plaintiff's motion for class certification.

Eric Tsai
Maurice Wutscher LLP
71 Stevenson Street, Suite 400
San Francisco, CA 94105
Direct: (415) 529-7654

Fax: (866) 581-9302

Mobile: (714) 600-6000

Email: etsai@MauriceWutscher.com

Admitted to practice law in California, Nevada and Oregon

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FYI: 9th Cir Confirms TILA Section 1641(g) Does Not Apply Retroactively

The U.S. Court of Appeals for the Ninth Circuit recently held that a 2009 amendment to the federal Truth in Lending Act ("TILA"), codified at 15 U.S.C. § 1641(g), which contains disclosure requirements for the sale or transfer of a mortgage loan, does not apply retroactively.

A copy of the opinion is available at:  Link to Opinion

The plaintiff homeowners ("Homeowners") brought a putative class action against two banks ("Banks") alleging violations of various federal and state laws and alleging claims arising out of the modification of the deed of trust for the plaintiffs' home ("Deed of Trust").  Among those claims, the Homeowners asserted that the Banks did not comply with the disclosure requirements of section 1641(g) when one of the Banks transferred the Deed of Trust to the other Bank in 2006.

As you may recall, TILA (at 15 U.S.C. 1641(g)) requires that "not later than 30 days after the day on which a mortgage loan is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee of the debt" must notify the "borrower in writing of such transfer."  The disclosure must also include the date of transfer, contact information of the new loan owner, and other relevant information. 

Failure to comply with those requirements allows a borrower to sue to recover actual damages, a statutory penalty up to $4,000 on individual claims and up to $1 Million in a class action, plus fees and costs.  See 15U.SC. § 1640(a).

However, Congress did not enact section 1641(g) until 2009.  Thus, the Homeowners argued that section 1641(g) purportedly applied retroactively. 

The Ninth Circuit disagreed and held that the section 1641(g) disclosure requirements did not apply retroactively because Congress did not express any clear intent for retroactive application.

The Court held that retroactive application of statutes is generally disfavored.  And, citing controlling U.S. Supreme Court precedent, the Ninth Circuit also held that the "presumption against retroactive legislation…can only be overcome where Congress expresses a clear and unambiguous intent to do so." 

As the Ninth Circuit further explained, the legal effect of a statute "should ordinarily be assessed under the law that existed when the conduct took place."  Thus, the Court held that if a new statutory provision, such as section 1641(g), would "impair rights a party possessed" when it previously acted, or otherwise "increase a party's liability for past conduct, or impose new duties with respect to transactions already completed," then courts may not apply a statute retroactively absent  a "clear congressional intent favoring such a result."

Applying these standards to the Homeowners claims, the Ninth Circuit examined the history of section 1641(g)'s enactment and the text of the statute itself. 

The Court held that retroactive application of § 1641(g) would plainly impair the Banks rights when they acted because, consistent with the law in 2006 (and the loan documents), the Banks "had a right to sell or transfer the loan without notice to the Borrower."  Also, the Ninth Circuit held that retroactive application of the law would increase the Banks' liability for damages because the 2009 amendment imposed new duties, a private right of action for failure to comply with those duties, statutory damages, and the ability for a borrower to recover attorneys' fees and costs.

Given the presence of these substantial factors weighing against retroactive application of section 1641(g), the Ninth Circuit examined whether there as any evidence in the statute itself or its legislative history showing that "Congress expressed a clear and unambiguous intent" that it apply retroactively. 

As the Court explained, when section 1641(g) was introduced in the U.S. Senate, the bill's sponsors stated that the TILA amendment was necessary because existing law only required notice to a borrower of a change in the servicer of their loan, and not a change in the owner of the loan. 

The Ninth Circuit found "no clear indication in Section 1641(g)'s text or in its legislative history that Congress intended for it to apply to loans that had been transferred before its enactment."  In addition, the Court noted that retroactive application of the statute would be absurd because if it were "given retroactive effect, the 30-day reporting period would have already lapsed for all loan transfers that occurred more than a month before enactment, and it would have been impossible for those creditors to comply with the reporting requirement." 

Thus, the Court held it was unlikely that Congress would have subjected creditors to such broad liability "without at least giving them a way to comply with section 1641(g) for loan transfers that predated its enactment." 

Accordingly, the Ninth Circuit held that section 1641(g) does not apply retroactively, and affirmed the lower court's ruling.

Eric Tsai
Maurice Wutscher LLP 
Stevenson Place

71 Stevenson Street, Suite 400
San Francisco, CA 94105
Direct: (415) 529-7654

Fax: (866) 581-9302

Mobile: (714) 600-6000

Email: etsai@MauriceWutscher.com

Admitted to practice law in California, Nevada and Oregon

CALIFORNIA   |   FLORIDA   |   ILLINOIS   |   INDIANA   |   MASSACHUSETTS   |   NEW JERSEY   |   NEW YORK   |   OHIO   |   PENNSYLVANIA   |   TEXAS   |   WASHINGTON, D. C.