The Ninth Circuit recently denied a motion for rehearing en banc in Marks v. Crunch, leaving in place a Ninth Circuit decision that broadly defines “automated telephone dialing system” (“autodialer”) under the Telephone Consumer Protection Act (“TCPA”). The decision conflicts with decisions from other circuits. And in the New Year, the FCC is expected to issue its own new interpretation of the term “autodialer” under the TCPA. Amidst this uncertainty, companies should proceed cautiously when reaching consumers by phone or text, and should consider how to minimize risk with respect to the TCPA’s autodialer provisions.

Jordan Marks signed up for a gym membership with Crunch Fitness in 2012. After joining the gym, he allegedly received three text messages from Crunch over a period of eleven months. He sued Crunch under the TCPA, alleging that Crunch used an autodialer to call him without his prior express consent and seeking to represent a putative class of other similarly-situated individuals. The district court granted summary judgment in favor of Crunch claiming that the Textmunication system that Crunch used to send the text messages was not an autodialer. Marks appealed.

Earlier this year, the Ninth Circuit reversed the district court, interpreting the term “automated telephone dialing system” to encompass not only devices with the capacity to call numbers produced by a “random or sequential number generator,” as the statute reads, but also devices that merely have “the capacity to dial stored numbers automatically.” The Ninth Circuit found that because Crunch’s texting system “stores numbers and dials them automatically to send text messages to a stored list of phone numbers as part of scheduled campaigns,” that was enough to survive summary judgment and for the lawsuit to proceed.

Crunch petitioned for a rehearing en banc and was joined by two amici. However, the Ninth Circuit denied the motion. Crunch has indicated in court filings that it now intends to appeal to the United States Supreme Court.

The Marks ruling contradicts two other circuit court rulings and comes at a time when the Federal Communications Commission is engaged in a proceeding to itself interpret the meaning of autodialer. The FCC’s current chairman, Ajit Pai has publicly taken the position that autodialer should be interpreted more narrowly than it was by the Ninth Circuit, and even noted in a 2015 dissent that the interpretation of ATDS now espoused by the Ninth Circuit defies grammar. See 2015 Order at 8074 (“[I]f [equipment] cannot store or produce telephone numbers to be called using a random or sequential number generator and if it cannot dial such numbers—then how can it possibly meet the statutory definition? It cannot.”). The FCC’s new interpretation is expected to issue in the New Year.

The United States Court of Appeals for the Second Circuit recently made clear that foreclosure actions qualify as “debt collection” under the Fair Debt Collection Practices Act (FDCPA). See Cohen v. Rosicki, Rosicki & Assocs., P.C., 897 F.3d 75 (2d Cir. 2018). Thus, even if a foreclosure action is not seeking a deficiency judgment and the proceeding is strictly in rem, it now falls under the FDCPA debt collection umbrella in the Second Circuit.

In Cohen, the borrower appealed the district court’s dismissal of his FDCPA claims based on the defendants’ allegedly incorrect identification of Green Tree Servicing LLC as the creditor in the foreclosure complaint, certificate of merit, and request for judicial intervention. The basis for the district court’s dismissal of the case was that “enforcement of a security interest through foreclosure proceedings that do not seek monetary judgments against debtors” does not qualify as debt collection within the scope of the FDCPA. The Second Circuit disagreed. Cohen, aff’d, 897 F.3d 75 (2d Cir. 2018) Continue Reading Second Circuit: Mortgage Foreclosure Constitutes “Debt Collection” Under FDCPA

In Washington State the statute of limitations on actions to enforce a note or deed of trust can be a brutally effective sword for borrowers. The limitations period is six years, and a borrower may sue for quiet title where “an action to foreclose . . . would be barred by the [statute of limitations].” RCW 7.28.300. If successful, the borrower is entitled to “judgment quieting title” against the security instrument. Two commonly litigated issues arising in this context are tolling and acceleration. The Court of Appeals of Washington recently published two noteworthy opinions as they relate to installment loans that should dampen quiet title claims based on the statute of limitations.

Tolling

Quiet title litigation based on RCW 7.28.300 often involves a loan in which foreclosure is delayed one or more times because of loss mitigation or bankruptcy filed by the borrower—easily extending the foreclosure well beyond six years of the default or acceleration. The potentially harsh effects of events beyond a lender’s control, such as bankruptcy, is ameliorated by RCW 4.16.230, which provides that a limitations period is tolled when “an action is stayed by . . . statutory prohibition.” The automatic stay under 11 U.S.C. § 362 is one such statutory prohibition. Nonetheless, borrowers have argued that § 362 is not a statutory prohibition for purposes of the tolling statute because a creditor may seek relief from the stay. Continue Reading <i>Merceri</i> Times Two Equals Clarity on the Statute of Limitations in Washington State

On June 28, 2018, the state of California adopted the strictest general privacy and data security law in the country. The “California Consumer Privacy Act” will become effective on January 1, 2020 and will transform how companies that handle consumer data will do business in California.

The Act will regulate the collection and sale of personal information by companies and will increase fines and penalties on businesses that fail to take “reasonable security measures” to safeguard Californian’s personal information. Businesses must notify consumers about the type of data they collect and must allow consumers the option to opt out of their personal information being sold or disclosed to third parties. California, already a popular venue for plaintiffs to file consumer privacy class action litigation, will likely see an increase in litigation when the Act becomes effective. This Act will apply to for-profit companies doing business in California that collect consumers’ personal information and exceed $25 million in gross revenue, handle the personal information of 50,000 or more consumers, devices or households, or derive more than 50% of their annual revenue from selling consumers personal information. Continue Reading

The linchpin of the Federal Fair Debt Collection Practices Act (“FDCPA”) is debt collection. Not surprisingly, litigation often focuses on the crucial question of what is a “debt” and who is a “debt collector” for purposes of the FDCPA. In Ho v. ReconTrust Co., NA, the U.S. Court of Appeals for the Ninth Circuit recently concluded that the enforcement of a security instrument by nonjudicial foreclosure is not debt collection as a matter of law.

The Ho court explained that “[t]he object of a non-judicial foreclosure is to retake and resell the security, not to collect money from the borrower[,]” and because “California law does not allow for a deficiency judgment following non-judicial foreclosure[,]” “the foreclosure extinguishes the entire debt even if it results in a recovery of less than the amount of the debt.” On this basis, the Ho court held that “actions taken to facilitate a non-judicial foreclosure, such as sending the notice of default and notice of sale, are not attempts to collect ‘debt’ as that term is defined by the FDCPA.” Continue Reading <em>McNair v. Maxwell & Morgan PC</em>: Judicial and Nonjudicial Foreclosure—A Distinction With a Difference

In a Declaratory Ruling and Order issued in 2015, the Federal Communications Commission (“FCC”) sought to clarify key aspects of the Telephone Consumer Protection Act (“TCPA”), including (1) what device making calls qualifies as an Automated Telephone Dialing System (“ATDS”), (2) whether a call made to a reassigned telephone number where the prior subscriber gave consent constitutes a violation, (3) the manner required for a consumer to revoke consent, and (4) whether healthcare-related calls are exempt. The United States Court of Appeals for the District of Columbia Circuit in ACA International v. Federal Communications Commission set aside two parts of the Order but upheld two others. Continue Reading <em>ACA International v. Federal Communications Commission</em>: A Mixed Opinion on the FCC’s Recent Interpretation of the Telephone Consumer Protection Act

Because New York residential foreclosures can take several years and several attempts to complete, it is essential for a statute of limitations analysis to be completed during all phases of the foreclosure proceedings. The discussion that follows includes some of the considerations that should be made during a statute of limitations analysis.

Background

Mortgage debt accrues as each installment becomes due, with a six-year statute of limitations running accordingly. CPLR 213(4); Koeppel v. Carlandia Corp., 21 A.D.3d 884, 800 N.Y.S.2d 607 (2d Dept. 2005). Where there is an acceleration clause giving the creditor the right to declare the whole amount due, the six-year statute of limitations begins to run on the full amount of the debt at the time of acceleration. Zinker v. Makler, 298 A.D.2d 516, 748 N.Y.S.2d 780 (2d Dept. 2002); EMC Mortgage Corp. v. Patella, 279 A.D.2d 604, 720 N.Y.S.2d 161 (2d Dept. 2001). While acceleration clauses can be categorized as automatic or optional, most clauses are not considered truly self-operative in nature. Seligman v. Burg, 233 A.D. 221, 251 N.Y.S. 689 (2d Dept. 1931). In most residential foreclosure actions, acceleration occurs at commencement of the action, which would include a provision explicitly calling the entire amount due. See, e.g., Walsh v. Henel, 226 A.D. 198, 235 N.Y.S. 34 (4th Dept. 1929). Continue Reading Limitations to the New York Foreclosure Statute of Limitations