An attorney's bid to circumvent restrictions on class actions under New York law to bring a claim in federal court under a law banning unsolicited fax advertisements has been rejected by the 2nd U.S. Circuit Court of Appeals.
The 2nd Circuit said attorney Todd C. Bank used an "inventive" approach in trying to bring a class action under the Telephone Consumer Protection Act in federal court, but that Bank's 10,000 purported class members would have to bring individual actions.
On behalf of name plaintiff Harold Bonime, Bank filed in the Eastern District a claim under the Telephone Consumer Protection Act 47 U.S.C. §227(b)(1)(C), which bars using fax machines and other devices such as automatic dialers to send unsolicited advertisements.
The suit claims that telecommunications equipment company Avaya had its business partners send faxes to the purported class members, a violation of the consumer protection act that exposed Avaya to a claim for actual monetary damages or $500, whichever is greater.
Judge Carol Amon dismissed the case and the plaintiffs took the appeal in Bonime v. Avaya Inc., 07-1136-cv, to the circuit, where Judges Guido Calabresi, Barrington D. Parker and, sitting by designation, Judge Stefan Underhill of the District of Connecticut, heard the appeal.
Writing for the court, Judge Parker said the lawsuit sits "at the intersection of two procedurally unusual laws -- the TCPA, which creates a federal claim designed to be brought in state court," and the Class Action Fairness Act, "which gives federal courts original jurisdiction over certain class actions brought under state law."
While over 40 states have laws against invasive telemarketing solicitations, the states do not have jurisdiction over interstate calls, so Congress filled the gap by passing the Telephone Consumer Protection Act, which created a private right of action allowing a plaintiff, "if otherwise permitted by the laws or rules of the court of a State," to bring an action in an appropriate court of that state.
In Gottlieb v. Carnival Corp., 436 F.3d 335 (2d Cir. 2006), the circuit interpreted §227(b)(3) of the Telephone Consumer Protection Act as intending to "confer exclusive state court jurisdiction over private rights of action under the TCPA."
But the Gottlieb court also answered another question, ruling "Congress did not divest the federal courts of diversity jurisdiction over private actions under the TCPA" since "nothing in §1332(a) indicates that diversity jurisdiction does not exist where federally-created causes of action are concerned."
But that did not solve the question in this case, because Bank and his would-be class of plaintiffs tried to ground jurisdiction in the Class Action Fairness Act, 18 U.S.C. §1332(d)(2)(A), which confers original federal jurisdiction over any class action where at least one plaintiff and one defendant are from different states and the amount in controversy is over $5 million.
Another factor in the analysis is that New York courts have held that state CPLR 901(b) bars class actions under New York law unless the relevant statute specifically authorizes class actions.
The decision to "bring a putative class action in federal court under §1332(d)(2)(A) is undoubtedly motivated by his desire to avoid the barrier erected by C.P.L.R. 901(b)," Parker said. "This tactic, while inventive, fails."
The plaintiff's attorney argued that the Erie Doctrine, Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938), which holds that state substantive law applies to state law claims in federal court, does not apply in this case because the Telephone Consumer Protection Act is a federal law. He also argued that because the CPLR was procedural and not substantive, it does not apply to Telephone Consumer Protection Act cases in federal court.
But Parker said that Bank's argument was "beside the point" because "Congress directed that the consumer protection law be applied as if it were a state law."
Applying the Erie Doctrine, he said, "leads to the conclusion that the federal courts must apply C.P.L.R. 901(b) when faced with putative New York class actions brought under the TCPA even when a plaintiff has invoked federal diversity jurisdiction."
Bank said, "The court was wrong in two respects -- first in saying that state law governs a TCPA claim in federal court and second, even if the court were right about that, the New York class action restriction is procedural and, like any procedural rule, it governs the court in this case, the New York state courts, and not the claim."
Glenn C. Colton and Tonia Ouellette Klausner of Wilson Sonsini Goodrich & Rosati represented Avaya.
Colton said the circuit reached a "common sense result that discourages forum shopping."
"One should not be able to pursue a claim solely by virtue of the diversity of citizenship," Colton said. "Plaintiff's use of the Class Action Fairness Act runs directly contrary to the congressional purpose of discouraging forum shopping and the 2nd Circuit properly disallowed it."