Category: TCPA Class Action Litigation

By Gerald L. Maatman, Jr., Jennifer A. Riley, Emilee Crowther, and Zachary J. McCormack

Duane Morris Takeaways: In Drazen v. Pinto, No. 21-10199, 2024 U.S. App. 2024 LEXIS 11590 (11th Cir. May 13, 2024), the Eleventh Circuit vacated a district court’s final approval of a settlement of a class action alleging GoDaddy, Inc. violated the Telephone Consumer Protection Act (“TCPA”) by sending unwanted marketing texts and phone calls through a prohibited automatic telephone dialing system (“ATDS”). The Eleventh Circuit held the district court abused its discretion by approving the class-wide settlement, which would have provided up to $35 million to pay class members’ claims and up to $10.5 million to class counsel in attorneys’ fees. The Eleventh Circuit opined that the district court erred by overlooking evidence of collusion between class counsel and GoDaddy’s attorneys.

The Eleventh Circuit concluded that the district court inappropriately certified the class, and should not have approved the proposed settlement agreement and granted class counsel’s motion for attorneys’ fees. In doing so, the district court overlooked evidence of collusion between class counsel and GoDaddy’s attorneys, treated the settlement as a common fund instead of a claims-made resulution, and improperly calculated attorney fees after erroneously concluding it was not a coupon settlement. The Eleventh Circuit remanded the case back to the district court for further proceedings.

The Eleventh Circuit’s 123-page opinion offers a treasure trove of insights regarding the need for constant vigilance when it comes to TCPA compliance — particularly for employers involved in these types of class actions.

Case Background

GoDaddy, Inc., a publicly traded multi-billion-dollar U.S. corporation, provides services – including domain registration, website hosting, payment processing, and marketing support – to entrepreneurs around the globe. Id. at *2. The Drazen litigation consisted of three consolidated TCPA class action lawsuits brought against GoDaddy alleging the company sent unwanted marketing texts and phone calls through ATDS. Id. at *13. The parties eventually negotiated a settlement agreement where GoDaddy would provide up to $35 million to pay class members’ claims and up to $10.5 million to class counsel in attorneys’ fees. Id. at *41. The plaintiffs moved the district court to certify a Rule 23(b)(3) class for settlement purposes, to preliminarily approve the negotiated settlement agreement, and to approve the draft notice of proposed settlement to class members. Id. at *21. The district court granted preliminary approval of the settlement and directed that notice of the proposed settlement be given to the class. Id. at *22.

Shortly after counsel emailed the notice to the class, the Supreme Court granted certiorari in Facebook, Inc. v. Duguid, 592 U.S. 395, 401-02 (2021), which took up the same principal issue in the plaintiffs’ consolidated actions: whether a device must have certain capabilities to constitute an auto dialer under the TCPA. Class counsel, anticipating an impending Supreme Court ruling in Facebook that could impact a settlement, urged the district court to enter a final judgment approving the settlement and grant its attorneys’ fees motion. Id. at *7.

The district court granted class counsel’s motion over the objection of Juan Pinto, an individual class member, who argued (i) the district court prematurely ruled on attorneys’ fees before the deadline for objections, and (ii) the fees awarded were far in excess of what class members would receive, making the settlement unfair, unreasonable, and inadequate. Id. at *8. Over the objections of this individual class member, the district court approved the settlement, and Juan Pinto appealed. Id. at *9.

The Eleventh Circuit’s Decision

The Eleventh Circuit concluded the district court abused its discretion in approving the class-wide settlement agreement. Among other oversight, the district court failed to account for the 2018 amendments to Rule 23(e)(2), it overlooked evidence indicating that the settlement agreement was the product of collusion, and that the notice of the proposed settlement failed to inform the absent class members of the claims, issues, or defenses in plaintiff’s cases as required by Rule 23(c)(2)(B)(iii), fundamental due process, and the district court’s fiduciary obligation to the absent class members. Id. at *9. The Eleventh Circuit highlighted various errors committed by the district court in its 123-page opinion, but focused primarily on three areas.

First, the Eleventh Circuit concluded that it was improper for the district court to determine the settlement as fair, reasonable, and adequate without considering Rule 23(e)(2)(A). Id. at *59. The district court also overlooked evidence indicating that the settlement agreement was the product of collusion, such as the overbroad, sweeping release provision and inadequate relief provided to the class relative to what class counsel and GoDaddy received. Id. at *60. Rule 23 and due process require that, in finalizing a class settlement, the parties and the district court must give absent class members a meaningful opportunity to opt-out or challenge the class settlement. Id. at * 66.

Second, the Eleventh Circuit determined that the notice of the proposed settlement failed to inform the absent class members of the “claims, issues, or defenses” in the plaintiffs’ cases as required by Rule 23(c)(2)(B)(iii), fundamental due process, and the district court’s fiduciary obligation to the absent class members. Id. at *71. The Eleventh Circuit adopted the interpretation of Rule 23(c)(2)(B)(iii) as “conjunctive”, and that class members must be informed not only of the claims asserted, but also of the dispositive issue in Facebook and how its decision would affect the case. Id. at *77. The Eleventh Circuit’s opinion further suggested that additional notice should have been provided regarding this development.

Third, the Eleventh Circuit found that the district court erred in three ways when it calculated attorney’s fees considering it: (1) misapplied Rule 23(h), (2) treated the settlement as a common fund when it was claims-made, and (3) determined that this was not a settlement involving coupons under the Class Action Fairness Act (“CAFA”) and thus declined to examine class counsel’s motion for attorney’s fees with CAFA-mandated scrutiny and procedures. Id. at *9. First, the district court failed to give absent class members advance notice of class counsel’s fee motion, which disregarded the manifest intent of Rule 23(h). Id. at *79. The schedule proposed by the parties and adopted by the district court provided class members with only 7 days to review the attorney’s fees motion before the objection deadline, and the notice did not specify when that motion would be filed, which the Eleventh Circuit strongly criticized. Id. at *80. Second, although labeled a “common fund,” the settlement really involved a “claims made” structure where class counsel may recover the full amount of the attorneys’ fees sought; the class members, however, recover only if they submit claims. Id. at *79. Finally, the district court declined to apply class CAFA-mandated scrutiny and procedures, which was an error as the settlement allowed the class members to choose a cash award instead of a voucher. Id. at *89.

For these reasons, the Eleventh Circuit vacated the judgment, and remanded to the district court for further proceedings.

Implications Of The Decision

The Eleventh Circuit’s opinion depicts the latest legal developments in the constantly changing TCPA landscape, and the need to structure class settlement agreements in a way that obtains peace and withstands judicial scrutiny. In an effort to avoid expensive repercussions, employers and corporate counsel must exercise caution when drafting settlement documents in class-wide resolutions. Corporate counsel should take note of the dangers of the TCPA, as well as the potential pitfalls in faulty class action settlement agreements, and continue to monitor this space for future developments.

Duane Morris Takeaway: This week’s episode of the Class Action Weekly Wire features Duane Morris partner Jennifer Riley and associate Derek Franklin with their discussion of 2023 developments and trends in TCPA class action litigation as detailed in the recently published Duane Morris TCPA Class Action Review – 2024.

Check out today’s episode and subscribe to our show from your preferred podcast platform: Spotify, Amazon Music, Apple Podcasts, Google Podcasts, the Samsung Podcasts app, Podcast Index, Tune In, Listen Notes, iHeartRadio, Deezer, YouTube or our RSS feed.

Episode Transcript

Jennifer Riley: Welcome to our listeners! Thank you for being here for our weekly podcast, the Class Action Weekly Wire. I’m Jennifer Riley, partner at Duane Morris, and joining me today is associate Derek Franklin. Thank you for being on the podcast.

Derek: Thank you Jen! Happy to be part of the podcast.

Jen: Today on the podcast we are discussing the recent publication of the inaugural edition of the Duane Morris Telephone Consumer Protection Act (or TCPA) Class Action Review. Listeners can find the eBook publication on our blog, the Duane Morris Class Action Defense blog. Derek, can you tell listeners a bit about the publication?

Derek: Absolutely Jen. The TCPA has long been a focus of litigation, particularly for class actions. To that end, the class action team at Duane Morris is pleased to present the TCPA Class Action Review – 2024. This publication analyzes the key TCPA-related rulings and developments in 2023 and the significant legal decisions and trends impacting this type of class action litigation for 2024. We hope that companies will benefit from this resource in their compliance with these evolving laws and standards.

Jen: In 2023, courts across the country issued a mixed bag of results leading to major victories for both plaintiffs and defendants. Derek, how often were classes certified in TCPA actions in 2023?

Derek: There were wins on both sides, but the plaintiffs’ bar came away ahead in terms of getting classes certified. Courts granted motions for class certification nearly 70% of the time, and denied class certification motions only 30% of the time in 2023.

Jen: Interesting and a fairly high certification rate for these cases. Another notable legal issue that courts grappled with in the context of the TCPA during 2023 is the threshold for what can constitute a concrete injury for purpose of having Article III standing to bring a viable claim. Were there any notable rulings in 2023 that discussed Article III standing?

Derek: Yes Jen, there were several rulings that discussed these very issues in the TCPA Class Action Review. In Drazen, et al. v. Pinto, for example, the Eleventh Circuit ultimately concluded that a single unwanted text message may not “be highly offensive to the ordinary reasonable man,” but it was nonetheless offensive to some degree to a reasonable person. The Eleventh Circuit ruled that the harm of receiving one text message shared a close relationship with the harm underlying the tort of intrusion upon seclusion, and thus, receipt of an unwanted text message causes a concrete injury sufficient to confer Article III standing.

Jen: Thanks so much Derek, I anticipate that these standing questions will remain hotly debated in the courts in 2024. The Review also talks about the top TCPA settlements in 2023. How did plaintiffs do in securing settlement funds last year?

Derek: Plaintiffs did very well in securing high dollar settlements in 2023. The top 10 TCPA class action settlements totaled $103.45 million.

Jen: We will continue to track those settlement numbers in 2024, as record-breaking settlement amounts have been a huge trend we have tracked the last two years. Thanks Derek for being here today, and thank you to the loyal listeners for tuning in! Listeners please stop by the blog for a free copy of the TCPA Class Action Review e-book!

Derek: Thanks for having me Jen and thanks to all the listeners!

By Gerald L. Maatman, Jr., Jennifer A. Riley, Emilee Crowther, and Ryan Garippo

Duane Morris Takeaway: The Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227, et seq., has long been a focus of consumer litigation, particularly for class actions. Since the TCPA was enacted 30 years ago, the methods and technology that businesses use to engage and interact with customers has evolved and changed. The trend of states enacting or amending their own mini-TCPAs shows no signs of slowing down, making this subject area a likely continued focus for the plaintiffs’ class action bar in years to come.

To that end, the class action team at Duane Morris is pleased to present a new publication – the 2024 edition of the TCPA Class Action Review. We hope it will demystify some of the complexities of TCPA class action litigation and keep corporate counsel updated on the ever-evolving nuances of these issues.  We hope this book – manifesting the collective experience and expertise of our class action defense group – will assist our clients by identifying developing trends in the case law and offering practical approaches in dealing with TCPA class action litigation.

Click here to download a copy of the Duane Morris TCPA Class Action Review – 2024 eBook.

Stay tuned for more TCPA class action analysis coming soon on our weekly podcast, the Class Action Weekly Wire.

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Nick Baltaxe

Duane Morris Takeaways: On June 30, 2023, in Kristen Hall v. Smosh Dot Com, Inc., DBA Smosh, et al., No. 22-16216 (9th Cir. June 30, 2023), the Ninth Circuit reversed the district court’s dismissal for lack of Article III standing of a class action under the Telephone Consumer Protection Act (the “TCPA”) and remanded the claim for further proceedings.  In doing so, the Ninth Circuit held that the owner and subscriber of a phone with a number listed on the Do-Not-Call Registry suffers an injury in fact when unsolicited telemarking calls or texts are sent to the number even if the communications are intended for or solicited by another individual or someone else is using the phone at the time the messages are transmitted.  In so holding, the Ninth Circuit established that the receipt of unsolicited phone calls or text messages in violation of the TCPA is a “concrete injury in fact sufficient to confer Article III standing” even if the individual bringing the claim was not the phone’s primary user.  As a result, the ruling is required reading for any corporate counsel dealing with TCPA class action litigation.

Case Background

Plaintiff Kristen Hall, a resident of Willis, Texas, was in possession of a cellular phone that was used primarily for residential purposes and, at times, provided to her 13-year old son to use in his free time.  Hall, No. 22-16216, at 5-6.  Plaintiff placed this number on the National Do-Not-Call Registry in order to avoid invasive and irritating solicitation calls and to protect her son from any potential threats.  Id.  Plaintiff alleged that she was the owner and subscriber of the cell phone at issue and that she listed its number on the Do-Not-Call Registry.  Id. at 9.

On or around November 3, 2019, Defendants – who are digital content creators producing “sketch comedy” for an adolescent audience and selling merchandise that relates to their digital content – obtained the personal information for Plaintiff’s son and sent him at least five text messages between December 25, 2019, and June 29, 2020.  Id.  These texts specifically solicited business and offered discounts on products offered by Defendant Smosh Dot Com, Inc., which Plaintiff alleged was “irritating, exploitative, and invasive” and “precisely the type of communications she sought to avoid when she registered her number on the Do Not Call [R]egistry.”  Id.  Plaintiff’s First Amended Complaint alleged that Defendants violated § 227(c) of the Telephone Consumer Protection Act (“TCPA”) by sending text messages to numbers listed on the National Do-Not-Call Registry.  Id. 

Defendants moved to dismiss the First Amended Complaint for failure to state a claim and for lack of standing. They argued that Plaintiff lacked Article III standing because she failed to plead that she was the user of the phone or actually received any of the soliciting text messages from Defendants.  Id. at 6-7.  Specifically, Defendants argued that because she provided the phone to her son, Plaintiff was not the actual user of the phone or the actual recipient of the messages and, therefore, did not suffer an injury and was instead attempting to assert the legal right of a third party.  Id. at 9-10.  The district court granted the motion to dismiss on the basis that Plaintiff did not have Article III standing merely because she was the subscriber/owner of the phone while not addressing any of the merits issues.  Id. at 7.  Plaintiff appealed this ruling.  Id.

The Ninth Circuit’s Ruling

The Ninth Circuit reversed the district court’s ruling.

It held that Plaintiff had Article III standing to bring the claims under the TCPA.  The Ninth Circuit noted that it was well established that unsolicited telemarketing phone calls or text messages in violation of the TCPA is a concrete injury in fact that, itself, is enough to confer Article III standing. It cited to Van Patten v. Vertical Fitness Grp., LLC, 847 F.3d 1037, 1043 (holding that “[u]nsolicited telemarketing phone calls or text messages, by their nature, invade the privacy and disturb the solitude of their recipients).  Id. at 8.  Importantly, the Ninth Circuit made clear that the relevant question for Article III standing is whether Plaintiff suffered a cognizable injury.  Id. at 12.  The Ninth Circuit reasoned that because a violation of the TCPA is a “concrete injury,” and the Do-Not-Call provisions of the TCPA proscribe unsolicited calls and text messages to phone numbers on the Do-Not-Call Registry, Plaintiff’s allegations that she received unsolicited text messages on a number on the registry were sufficient to confer standing.  Id.

To reach this holding, the Ninth Circuit found no precedent that the owner of a cell phone also must be the primary or customary user to be injured by unsolicited phone calls or text messages.  Id. at 13.  The Ninth Circuit reasoned that requiring a certain level of phone usage to be a prerequisite for standing would go against Congress’ intention of preventing individuals on the Do-Not-Call Registry from receiving unsolicited text messages.  Id.  The Ninth Circuit also opined that this holding would not prevent other users of the phone from bringing claims, as they may also suffer a concrete injury from an unwanted call or text message.  Id.

Importantly, the Ninth Circuit did not address the merits of Plaintiff’s claim, and refused to discuss Defendants’ contention that Plaintiff’s son solicited the text messages by signing up for telecommunications through an online form.  Id.  Instead, the Ninth Circuit held that, even if Plaintiff’s son solicited the messages, therefore affecting the merits of her claim, Plaintiff still had standing to bring her own claim by the virtue of her status as the subscriber and owner of the phone.  Id. at 14.  The Ninth Circuit additionally did not address the question of whether a subscriber would have Article III standing to litigate a TCPA claim if he or she authorized a third-party user to provide consent to a telemarketer, leaving that question open for the district court to discuss on remand.  Id. at 9.

Key Takeaways

The Ninth Circuit has now established that all that is required for Article III standing under the TCPA is the receipt of unsolicited text messages or phone calls to a number owned or subscribed to by an individual and found on the Do-Not-Call Registry, even if that individual is not the primary user of the phone.

This ruling curtails attacks on the pleadings by TCPA defendants, especially with the language included by the Ninth Circuit that standing is “not exclusive” and numerous subscribers/users can bring TCPA claims.  However, with the Ninth Circuit leaving open the question of whether a subscriber would have standing if he or she authorized a third-party user to provide consent to receive telemarketing, companies defending TCPA claims still may have a path forward to attacking standing for subscribers of phones on the Do-Not-Call Registry with third-party users.  Until then, companies should be cognizant that even if a phone user solicited communications by signing up for those communications, the phone subscriber will still have standing to bring a claim under the TCPA.