Friday, September 10, 2010

Class Action for Junk Faxes Prohibited by New York Law

This posting was written by Thomas A. Long, Editor of CCH Privacy Law in Marketing.

The federal district court in Brooklyn lacked jurisdiction over an individual’s purported class action under the Telephone Consumer Protection Act (TCPA) against a sender of unsolicited fax advertisements, the U.S. Court of Appeals in New York City has held.

Federal courts lack federal question jurisdiction under the TCPA, and the federal Class Action Fairness Act could not be used to establish federal diversity jurisdiction because New York law prohibited class actions for statutory damages under the TCPA.

The case was before the court on remand from the U.S. Supreme Court (Privacy Law in Marketing ¶60,474), which had vacated a prior decision by the appellate court and remanded the case for further consideration in light of the Supreme Court’s decision in Shady Grove Orthopedic Associates, P.A. v. Allstate Ins. Co., 130 S.Ct. 1431 (2010).

New York Civil Practice Law

In the prior decision, the appellate court had affirmed a decision of the federal district court in Brooklyn (Privacy Law in Marketing ¶60,473) that class actions could not be brought in New York under the TCPA because New York Civil Practice Law Sec. 901(b) provided that class actions could not be brought under statutes that imposed a penalty or a “minimum measure of recovery” unless that statute specifically authorized class actions.


In Shady Grove, the Supreme Court held that Sec. 901(b) did not apply to state-law claims in federal court, regardless of whether Sec. 901(b) was “substantive” or “procedural” in nature, because Sec. 901(b) was preempted by Federal Rule of Civil Procedure 23, which authorized class-action suits in federal courts when various criteria were met.

The appellate court distinguished Shady Grove from the present case, however, reasoning that the TCPA provided its own basis for determining that jurisdiction was lacking.

Claims Not Permitted by State Law

Even if Sec. 901(b) was preempted by Rule 23, the appellate court said, the TCPA unambiguously precluded claims from being brought under its provisions if the claims were not permitted by state law. Federal courts were constrained to respect that limitation on the TCPA.

Because the TCPA used state law to define the federal cause of action, and the state refused to recognize that cause of action, there remained nothing to which any grant of federal jurisdiction could attach, the court concluded.

The decision is Holster v. Gatco, Inc., CCH Privacy Law in Marketing ¶60,523.

Further information regarding CCH Privacy Law in Marketing appears here on the CCH Online Store.

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