Court Strikes Non-Forum Class Members’ Claims in TCPA Class Action under <i>Bristol-Myers Squibb</i>We have been closely watching how courts have applied the Supreme Court’s Bristol-Myers Squibb decision in the class action context, and the early results are mixed. But the Northern District of Illinois made a big step in the right direction when it decided America’s Health and Resource Center, Ltd. v. Promologics, Inc. The court granted the defendants’ motion to strike the class allegations because (among other things) the court lacked personal jurisdiction over non-Illinois members of the alleged class.

Promologics is a TCPA case involving alleged junk faxes. While the case’s discussion is not clear on where the allegedly improper faxes originated, they did not come from Illinois. Instead, they were sent to recipients both inside and outside of Illinois.

In response to the defendants’ B-MS jurisdictional objection, the plaintiffs argued that B-MS does not apply to class actions, and in the alternative, that defendants’ challenge was untimely.

The court dealt swiftly and decisively with the threshold question applying Bristol-Myers Squibb to class actions. Grabbing hold of the Supreme Court’s statement that “due process requires ‘a connection between the forum and the specific claims at issue,’” the court expressed its “belief that Bristol-Myers Squibb applies in equal measure to class actions.” It also quoted the Eastern District of New York’s pithy line from In re Dental Supplies Antitrust Litigation: “The Constitutional requirements of due process do[ ] not wax and wane when the complaint is individual or on behalf of a class.”

The court had little trouble applying B-MS to this class action, but wrestled more with the question of timeliness—and the defendants almost certainly experienced a range of emotions as they read the court’s opinion. As we all know from Civil Procedure 101, defendants must raise personal jurisdiction challenges in their first responsive pleading or else the objection is waived.  The Promologics defendants did not do so because Bristol-Myers Squibb had not then been decided. After that opinion came down, they argued that it changed the law enough to justify giving them a chance to raise it. The court disagreed. It concluded that B-MS merely clarified the law about personal jurisdiction, but did not so fundamentally change the law as to excuse the defendants’ failure to raise a timely objection. “Without an intervening change in the law and without an earlier, controlling authority blockading such efforts, Defendants’ failure to mount a timely challenge to personal jurisdiction constitutes forfeiture of that challenge.”

At this point, things look pretty bleak, but the court “excuse[d] the forfeiture” on its own initiative by noting that courts have the independent power to apply the proper governing law.  Thus, regardless of who raised what issues when, the court found that Bristol-Myers Squibb was the controlling law, and applied it accordingly.

This case helps defendants in three important ways:

First, particularly while we wait for the first appellate court to weigh in on the issue, the more district courts that apply B-MS to class actions the better. Appellate courts will certainly do more than count district court opinions when they decide whether to apply B-MS in the class context, but they will still count cases. And in the task of persuading the first appellate court or another district court, every good case makes the string cite longer and adds another helpful quote to the arsenal available to defendants.

Second, though the passage of time means that fewer pre-B-MS cases are percolating through the system, the court’s willingness to apply B-MS in the face of a finding of forfeiture reminds companies that they may be able to press this argument even if their early case pleadings did not raise it.

Third, note carefully that the court found that B-MS did not radically change the law, a view that defendants should adopt. Instead of treating B-MS as a landmark case, consider that it merely follows on and clarifies personal jurisdiction law going all the way back to International Shoe. Relying on the case in this way puts defendants on the strongest footing to defeat the argument that B-MS does not apply in class actions. There is no special rule for specific personal jurisdiction in class actions or mass actions—there is just one rule for all cases. That is the true rule of B-MS.

Irrevocable Consent Comes to the Eleventh Circuit: Two District Courts Apply Reyes to Boot TCPA CasesA critical question in Telephone Consumer Protection Act (TCPA) cases is whether the plaintiff gave consent to receive communications from the defendant, and whether that consent had been revoked by the time of the communication. Given the problems with the TCPA in general, you would probably not be surprised to learn that the TCPA does not specify how a person can revoke consent. The TCPA lawsuit industry wants a world where a person can give formal consent to receive communications and then revoke it on a whim. This “anything goes” revocation standard can expose companies to sudden and sizable liability.

Thankfully, the Second Circuit held in Reyes v. Lincoln Automotive Financial Services that a person who gives consent as part of a bargained-for exchange cannot unilaterally revoke it. Where a consumer consented as part of the consideration for the contract, the company can continue to rely on that consent.

Irrevocable consent under Reyes is anathema to TCPA cases because most companies are––or soon will be––including appropriate consent language in their agreements with their customers.

The big question facing companies now is whether Reyes will expand beyond the Second Circuit. While some early trends were bad, we are happy to report that two district courts in the Eleventh Circuit have relied on Reyes to grant summary judgment in TCPA cases.

The first of these two cases is Few v. Receivable Performance Management, in which the Northern District of Alabama granted summary judgment in a single-plaintiff case. In Ms. Few contract with her satellite TV provider, she agreed that the provider and any debt collector acting on the provider’s behalf could contact Ms. Few at a particular phone number. A debt collector then called Ms. Few to recover an alleged debt, and Ms. Few said that she did not wish to receive calls. The debt collector nevertheless called or texted more than 180 times.

No dice, ruled the district court. In the absence of controlling Eleventh Circuit precedent, the court found Reyes persuasive and applied the bargained-for exchange rule: “because she offered that consent as part of a bargained-for exchange and not merely gratuitously, she was unable to unilaterally revoke that consent.”

The Middle District of Florida––a notoriously dangerous TCPA jurisdiction for defendants––reached a similar result in Medley v. Dish Network, LLC. The plaintiff, Ms. Medley, complained that her lawyer had effectively revoked her consent to be contacted by Dish, which responded with a Reyes argument. The court agreed with Dish, and cited the Northern District of Alabama’s Few case with approval. It also helpfully distinguished several cases that had permitted unilateral consent revocation.

These cases are good news for companies facing TCPA liability in the Eleventh Circuit. While the appeals court has recognized federal common law governs issues of giving and revoking consent, it has not yet addressed Reyes and the effect of a bargained-for exchange. It is hoped that Few and Medley will lead a trend toward further adoption of Reyes.

The takeaway in litigation is to press the Reyes issue. Some courts have reached unfavorable conclusions when addressing consent and revocation in the abstract, but courts have been more receptive to defendants that can point to the particular inequity of a plaintiff getting the benefits of consent in a contract and then repudiating the contract to obtain a TCPA windfall.

Specific to the class-action context, the adoption of Reyes affords multiple chances to defeat class claims. Early summary judgment practice on consent and revocation can put putative class representatives on the defensive, and potentially complicate plaintiff’s efforts to show adequacy, commonality and typicality. Putative class representatives may also have to resort to individualized facts to show why they should be allowed to back out of the deal that included their consent, potentially putting plaintiffs on the horns of a dilemma: Save the class and risk losing the whole case, or save the case and risk losing the class-action payday.

We’ll close with a practical point: Companies should be studying their consumer-facing agreements to determine whether a consumer’s consent to receive telephone communications is––or can be reconfigured to be––part of a bargained-for exchange. Companies can help manage their TCPA liability by crafting their customer agreements appropriately as to arbitration (including a non-severable class action waiver), indemnity, and the bargained-for nature of consent. These preventive measures, deployed effectively, can both dissuade the prowling packs of TCPA lawyers from bringing a claim in the first place, and also strengthen the company’s defense if litigation is filed.

Be Careful What You Ask For: Eleventh Circuit Holds That Arbitrator – Not Court – Decides Whether Arbitration Agreement Designating AAA Rules Allows for Class ArbitrationThe Eleventh Circuit has held that, absent express language to the contrary in the arbitration agreement itself, whether class arbitration is permitted under an arbitration agreement selecting American Arbitration Association (AAA) rules is an issue for the arbitrator to decide (Spirit Airlines, Inc. v. Maizes, No. 17-14415 (11th Cir. Aug. 15, 2018)). This decision highlights yet another class action-related circuit split calling for Supreme Court resolution, and also illustrates a potential pitfall in drafting effective arbitration agreements.

Case Background and Ruling

The case arose out of Spirit Airlines’ “$9 Fare Club,” a program offering cheaper fares and bag fees to members. Steven Maizes and three other individuals filed a claim in arbitration against Spirit claiming that the company violated the Fare Club agreement and asserting those claims on behalf of a putative class. The airline responded with a declaratory judgment action against the class representatives in federal court, seeking a declaration that the agreement’s arbitration clause did not authorize class claims. Spirit also sought to enjoin prosecution of the class claims in arbitration. Following a hearing, the district court denied Spirit’s request for an injunction, and dismissed the case. The court reasoned that the arbitration agreement, which required arbitration “in accordance with the rules of the American Arbitration Association then in effect,” of necessity incorporated Rule 3 of the AAA’s Supplementary Rules for Class Actions. Because the AAA rules require the arbitrator to determine whether the arbitration agreement permits class arbitration, the trial court dismissed Spirit’s case for lack of jurisdiction. The court also declined to allow Spirit’s vice president to testify that the company never had any intent to arbitrate more than one dispute at a time, as there was no ambiguity in the agreement requiring parol evidence to clarify.

On appeal, the Eleventh Circuit affirmed. The court first cited the Supreme Court’s decision in First Options of Chicago, Inc. v. Kaplan for the proposition that lower courts should not presume that parties to an arbitration agreement have agreed to have an arbitrator decide questions of arbitrability “unless there is clear and unmistakable evidence that they did so.” The court went on to hold that the parties’ selection of AAA rules in their agreement amounted to such clear and unmistakable evidence. In so doing, the court relied on its 2005 decision in Terminix Int’l Co. v. Palmer Ranch Ltd. Partnership, which involved individual rather than class arbitration. In Terminix, the court held that the parties’ adoption in their agreement of the AAA Commercial Arbitration Rules (including Rule 8(a), which grants the arbitrator the authority to determine the existence, scope or validity of the arbitration agreement) was clear and unmistakable evidence that the parties intended for the arbitrator to decide the agreement’s enforceability. The Eleventh Circuit in Spirit Airlines took the Terminix reasoning and holding as outcome-determinative, holding that invocation of the AAA rules put the arbitrability of class claims squarely in the hands of the arbitrator.

The court acknowledged that appellate decisions from the Third, Fourth, Sixth and Eighth Circuits have, by contrast, held that adoption of the AAA rules is not clear and unmistakable evidence of the parties’ intent to allow the arbitrator to decide the class arbitrability question. Nevertheless, the Eleventh Circuit read those decisions as requiring a higher showing for class arbitrability than for other issues of arbitrability, for which it could find “no basis” in Supreme Court precedent.


  • While the Eleventh Circuit may have felt its hands were tied by the decision in Terminix (which “weigh[ed] heavily” in the court’s consideration), its conclusion that there is no basis in the Supreme Court’s cases for requiring a higher burden in the class arbitrability context can fairly be questioned. In both its Concepcion and Stolt-Nielsen decisions, the Supreme Court described the dramatic differences between two-party and class arbitration, including vastly higher monetary stakes, due process concerns implicated by class proceedings, and stark disparities in speed, efficiency, formality and cost.
  • Layered onto these differences is the reality that appellate review is practically nonexistent in arbitration (including on questions of class arbitrability, if such are left to the arbitrator). If an arbitrator errs in the resolution of a class case (for example, in deciding certification, in approving or rejecting a class settlement, in failing to require adequate representation or class notice, or in dealing with class member opt-out rights), such an error is almost certain to go uncorrected. That may well mean that while the defendant is stuck with the arbitrator’s decision, the class may not be bound by it as a matter of due process, and therefore may be free to relitigate a result they don’t like, either individually or as a class. Given those risks, it is fair to require an express delegation to the arbitrator of the class arbitrability question, rather than simply relying on an inference based on the rules the parties selected.
  • Spirit Airlines creates a circuit split, one that the Supreme Court – given its recent interest in the interplay of class proceedings and the Federal Arbitration Act – seems likely to address sooner rather than later. (The split was deepened the following week, when the Tenth Circuit held that the parties’ adoption of AAA rules constituted clear and unambiguous intent to defer the question of collective action arbitrability to the arbitrator.)
  • Whether or not the Supreme Court takes up the issue, companies would do well to review their arbitration agreements. Many companies prudently craft their arbitration agreements to contain a class action waiver that is not severable and that expressly reserves the issue of class arbitrability to the courts. Jurisdiction to decide the issue should be expressly withheld from the arbitrator. (An award exceeding the arbitrator’s jurisdiction is one of the very few permissible grounds of appeal from an arbitrator’s decision as specified in the Federal Arbitration Act, 9 U.S.C. §16). Expressly disallowing use of the AAA Supplementary Rules for Class Actions might be another prudent drafting measure, as would adopting arbitration rules only to the extent that they do not conflict with the express terms of the arbitration agreement. Whatever the benefits of bilateral arbitration in any given circumstance, facing a class action before an arbitrator — with no necessary application of the rules of civil procedure or evidence, and no possibility of appellate review – is a place few defendants would want to be.
  • No matter what aspect of arbitration is at issue, relying on third-party arbitration rules without specifying rules in effect as of a certain date is risky because those rules are subject to change without notice. Companies should be explicit in stating the critical parts of their arbitration agreements and should not count on arbitration rules to supply them.

We continue to watch arbitration carefully. While arbitration has been a very successful tool in helping companies manage litigation risk, it is not a silver bullet. Companies need to be mindful of what questions are best decided by arbitrators, and what questions belong in court.