U.S. Supreme Court Grants Cert in Case Involving TCPA Federal Question Jurisdiction

A serious source of confusion for Telephone Consumer Protection Act (“TCPA”) litigants and practitioners is whether the cases may be heard in state or federal courts (or both). The TCPA is very unusual because, even though it is a federal statute, the text of the law provides that ”[a] person or entity may, if otherwise permitted by the laws or rules of court of a State, bring in an appropriate court of that State— (A) an action based on a violation of this subsection or the regulations prescribed under this subsection to enjoin such violation, (B) an action to recover for actual monetary loss from such a violation, or to receive $500 in damages for each such violation, whichever is greater, or (C) both such actions.” 47 U.S.C. §§ 227(b)(3) (emphasis added).

Courts have issued conflicting opinions regarding whether TCPA claims can be heard by federal judges. The majority of courts that have considered whether federal question jurisdiction exists for private TCPA claims have determined that Congress did notintend to grant federal question jurisdiction when it passed the TCPA. Several courts, however, have found TCPA claims can be brought in federal court, most notably those in the Seventh Circuit (which includes Illinois, Indiana and Wisconsin).

The Supreme Court recently granted a petition for a writ of certiorari in a TCPA case that addresses whether federal courts have jurisdiction to hear TCPA cases. In Mims v. Arrow Fin. Servs., LLC, No. No. 10-12077, 2010 WL 4840430 (11th Cir. Nov. 30, 2010), a consumer brought a private action in federal court against a financial services company, alleging the company engaged in illegal debt collection practices by leaving numerous voice mail messages on a consumer’s cellular phone. A federal court in Florida dismissed the case for lack subject matter jurisdiction based on its reasoning that Congress vested state courts with exclusive jurisdiction over TCPA claims. The Court of Appeals for the Eleventh Circuit affirmed the dismissal. The U.S. Supreme Court granted the consumer’s appeal. The Supreme Court will resolve the question of whether a Congress (via a federal statute) can divest federal courts of subject matter jurisdiction over TCPA lawsuits. (A defendant could still remove a TCPA class action to federal court provided diversity jurisdiction exists under the Class Action Fairness Act – and given the potentially annihilating damages that often accompany TCPA class actions, the $5 Million amount in controversy requirement is often readily satisfied.)

Although it may seem a highly technical issue, it does have serious implications for practitioners (and for those companies faced with TCPA lawsuits). One important result from the Court’s decision on where TCPA claims may be filed is that states often have laws that differ from federal law on important tactical issues. For instance, the Illinois Supreme Court recently issued a decision involving American Airlines bywhich it ruled that an offer of complete relief tendered to the proposed class representative prior to plaintiff’s seeking certification effectively moots the case. Federal law on the issue is decidedly more plaintiff friendly.

Second, certain states – like New York – have bars to class actions for certain statutory damages claims. E.g., N.Y. C.P.L.R. 901(b)). The Supreme Court ruled in its Shady Grovedecision that state law does not trump the Federal Rules of Civil Procedure (specifically, Rule 23). If the Supreme Court decides in Mims that only state courts have jurisdiction to hear TCPA cases, then such class action bars would apply. It is imperative to keep such tactical considerations in mind when deciding on the propriety of removal – assuming, of course, that removal is (and continues to be) an option.