Photo credit: Shutterstock.com

About five months after the U.S. Court of Appeals for the Third Circuit revived the case by ruling that a single unwanted promotional call was enough to allege a Telephone Consumer Protection Act violation, a federal judge in New Jersey has allowed it to proceed despite the defense’s “apparent … attempt to thwart class certification” by offering to settle for the full amount of the plaintiff’s claim.

U.S. District Judge Peter Sheridan, sitting in Trenton, refused Nov. 28 to dismiss the lawsuit, filed by plaintiff Noreen Sussino, against Work Out World Inc. (WOW), even though the gym insisted it had resolved Sussino’s claims by depositing $1,501 into her credit card account. The lawsuit alleged that WOW, in leaving a single unsolicited voice mail on Sussino’s phone, violated the TCPA.

Sussino alleged that she rejected the settlement offer from WOW and added that the money was instead deposited into her employer’s credit card account and that she has received no funds. Sussino had been a member of the gym and the telephone call was intended to attempt to persuade her to rejoin, according to Sheridan’s opinion.

WOW argued that the lawsuit should be dismissed as moot since it tendered full relief, but Sheridan disagreed, citing a closely watched U.S. Supreme Court case from last year.

“Here, it is apparent that WOW sought settlement with plaintiff in an attempt to thwart class certification,” Sheridan said in his ruling.

“However, to deny class certification at this point would be to deprive her of a ‘fair opportunity to show that certification is warranted,’” he added, quoting the U.S. Supreme Court’s 2016 ruling in Campbell-Ewald v. Gomez.

The Campbell-Ewald decision barred settlement offers designed to “pick off” lead plaintiffs in class actions but reserved any opinion on whether the situation would be different if the defendant actually paid the funds.

Sheridan noted that while the Third Circuit has yet to weigh in on whether a tender of full relief by a defendant that is rejected by a plaintiff moots classwide claims, the Seventh Circuit has ruled that it does not.

Earlier this year, in Fulton Dental v. Bisco, the Seventh Circuit ruled that a defendant’s deposit of $3,600 into a court account that compensated the lead plaintiff in full did not moot the entire class action.

Similarly, Sheridan noted, the Ninth Circuit found last year in Chen v. Allstate Insurance that Allstate Insurance Co.’s deposit of $20,000 into an escrow fund for the lead plaintiff didn’t moot a class action.

Pick-off settlements have been the subject of much controversy among litigators.

As Laura McNally, a partner in the Chicago office of Loeb & Loeb, told The National Law Journal in June, challenges to such settlement offers are percolating in several district courts. She said she expected more circuits to weigh in, possibly sending the issue back to the Supreme Court.

“This is going to continue to come up,” she said. “Because if it works, it could be such a powerful weapon for defendants.”

In the Sussino case, Sheridan said WOW failed to show how its settlement offer to Sussino constituted complete relief for the entire putative class.

“Not only did Plaintiff reject this offer, but WOW’s offer did not provide any monetary relief to the putative class under 47 U.S.C. § 227(b)(3),” Sheridan said. “As such, since WOW has failed to offer complete relief on Plaintiff’s class-wide claims, judgment is not warranted.”

The judge added that there also remains a factual dispute since WOW insisted it deposited the money into the credit card account Sussino originally used to join the gym and Sussino claimed that account belonged to her employer.

This is the second time the case has been before Sheridan.

The judge initially had dismissed the lawsuit, saying that one call alone was not sufficient to allege a violation of the act.

However, in July, a three-judge panel of the Third Circuit reversed.

WOW had argued that the act prohibits a single call only if the recipient is charged for that call, maintaining that the missed call and minutelong voice mail didn’t cost Susinno any money.

“If it were the case … that cellphone calls not charged to the recipient were not covered by the general prohibition, there would have been no need for Congress to grant the [Federal Communications Commission] discretion to exempt some of those calls,” Third Circuit Judge Thomas Hardiman wrote in the court’s opinion. “We also think it significant that this section states ‘calls to a [cellphone] … not charged to the called party’ can implicate ‘privacy rights’ that Congress ‘intended to protect,’ even if the phone’s owner is not charged for the call.”

The gym also claimed that the TCPA section in question pertains to landlines, not cellphones.

However, Hardiman noted, “Although it is true that the TCPA placed particular emphasis on intrusions upon the privacy of the home in 1991, this expression of particular concern for residential calls does not limit—either expressly or by implication—the statute’s application to cellphone calls. Accordingly, the TCPA provides Sussino a cause of action for the conduct she alleged.”

Another portion of the Third Circuit’s ruling dealt with whether Sussino had standing to sue. Considering congressional intent, the Third Circuit ruled she did.

“Congress squarely identified this injury. The TCPA addresses itself directly to single prerecorded calls from cellphones, and states that its prohibition acts ‘in the interest of [ ] privacy rights,’” Hardiman said. “The congressional findings in support of the TCPA likewise refer to complaints that ‘automated or prerecorded telephone calls are a nuisance [and] … an invasion of privacy.’”

WOW’s attorney, Joshua Bauchner, said he was disappointed with Sheridan’s latest ruling.

“We offered full relief,” said Bauchner, of the Woodland Park office of Ansell Grimm & Aaron. “We made every possible effort to provide relief, and they refused to accept it.”

Sussino’s attorney, Timothy Sostrain, of Keogh Law in Chicago, was away from his office and could not be reached for comment.