November 12, 2018

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No Way Intervention: Court holds that TCPA Defendant Waived One-Way Intervention Protections By Failing to Alert the Court to the Doctrine Earlier

The Bad Reyes saga just keeps on getting worse for TCPA defendants.

In a decision entered today, the Court has found that the Defendant waived its one-way intervention protections by doing nothing more than failing to alert the Court of its right to be free from pre-certification substantive rulings. See  Reyes v. BCA Fin. Services, Case No. 16-24077, 2018 U.S. Dist. Lexis 176628 (S.D. Fl. Oct. 15, 2018).  In other words, the Court has found that a TCPA defendant must affirmatively assert one-way intervention protections in order to preserve them.  The ruling can be found here: Reyes One Way Intervention Ruling

The Reyes story began back in May, 2018 when the Court issued its first critical ruling in Reyes v. Bca Fin. Servs., Case No. 16-24077-CIV-GOODMAN, 2018 U.S. Dist. LEXIS 80690 (May 14, 2018 S.D. Fl.), a case that would forever become known in TCPAland as “Bad Reyes.”  In that decision, the Court entered summary judgment on behalf of Plaintiff finding that  ACA Int’l had not overturned the 2003 and 2008 Predictive Dialer Rulings, becoming the first case in the country to so hold.

But fate had so much more in store for this case.

In June, the Court rejected the Defendant’s bid to take an interlocutory appeal of the summary judgment ruling concluding that there was not a “substantial ground for difference of opinion” on the issue of whether or not ACA Int’l set aside the FCC’s predictive dialer rulings. (Since then numerous courts have held that the rulings were set aside–including courts within the Eleventh Circuit and including the only Circuit Court of Appeal decision to consider the issue to date.)

And then things really went off the rails for Defendant when the court subsequently certified a massive wrong number class action in Bad Reyes. Reyes v. BCA Fin. Servs., No. 16-24077-CIV, 2018 U.S. Dist. LEXIS 106449 (S.D. Fla. June 26, 2018).

Interestingly, however, the entry of certification after summary judgment in favor of the Plaintiff seems to have violated the decades old rule protecting defendants from one way intervention. As I’ve written previously:

“The one-way intervention doctrine dates back to the U.S. Supreme Court holding in Am. Pipe & Constr. Co. v. Utah, 414 U.S. 538, 547, 94 S.Ct. 756, 763, 38 L.Ed.2d 713 (1974).  There the Court held, inter alia, that substantive merits issues cannot be addressed in dispositive fashion in a putative class action before certification issues are decided. Otherwise class members can benefit from awaiting the outcome of the dispositive motion–losing nothing if the class representative’s position is rejected and then leaping to join the class if the dispositive motion is decided in their favor. That would be unfair and, as the Supreme Court pointed out in Am. Pipe, the amended rules do not allow for such nonsense:

A recurrent source of abuse under the former Rule lay in the potential that members of the claimed class could in some situations await developments in the trial or even final judgment on the merits in order to determine whether participation would be favorable to their interests. If the evidence at the trial made their prospective position as actual class members appear weak, or if a judgment precluded the possibility of a favorable determination, such putative members of the class who chose not to intervene or join as parties would not be bound by the judgment. This situation—the potential for so-called ‘one-way intervention’—aroused considerable criticism upon the ground that it was unfair to allow members of a class to benefit from a favorable judgment without subjecting themselves to the binding effect of an unfavorable one. The 1966 amendments were designed, in part, specifically to mend this perceived defect in the former Rule and to assure that members of the class would be identified before trial on the merits and would be bound by all subsequent orders and judgments.

Am. Pipe & Constr. Co. v. Utah, 414 U.S. at 547.

As a result, class action practitioners know well to never file a dispositive motion pre-certification–at least not one that effects the claims of the class as a whole. Putative class counsel will not file such motions because doing so likely waives their clients’ right to subsequently seek certification. Defendant’s counsel will not do so because filing such a motion would likely be deemed a waiver of the rule against one-way intervention (i.e. an invitation to the Court to rule on the substantive issue pre-certification).”

Undeterred by the apparent violation of their one-way intervention protections, the intrepid Reyes defendant swiftly brought a motion for reconsideration asking the court to reconsider the certification ruling in light of its previous grant of summary judgment on the ATDS issue in favor of the Plaintiff. Despite its timely effort to assert the procedural abnormality, the Court has now rejected Defendant’s one-way intervention argument concluding that it had been waived.

In reaching that conclusion, the the Court first noted that parties have the responsibility to bring such arguments to a court’s attention and cannot merely expect the court to know the law. The Court argues that the failure to raise one way intervention effectuates a waiver because if “‘the law is the law and the Court knows the law,’ then the legal concept of waiver would be a nullity.” Reyes at *8.

Notably, of course, waiver is most often implied where a party takes an affirmative act contrary to a position later taken in litigation, so its not technically true that the legal doctrine of “waiver” would be rendered a “nullity” if parties were allowed to assume that courts will not act directly contrary to their rights. Nonetheless, the question of who has the responsibility to make sure the one way intervention doctrine is not violated is an interesting one.  As the Supreme Court notes, Rule 23 was amended to assure that “members of the class would be identified before trial on the merits and would be bound by all subsequent orders and judgments….” Am. Pipe & Constr. Co. v. Utah, 414 U.S. at 547. That seems to be an edict that is stern and rigid and not subject to an easy inference of waiver by a party that simply assumed the proceeding would not violate the Rules.

Then again, the Court has a very valid point vis “it is not the Court’s job to advance arguments on behalf of the parties.” So perhaps the issue is whether the protections against one way intervention are mere “arguments”–which are commonly waived when not asserted by parties in litigation– or are they affirmative rights that cannot be lightly waived absent knowing and voluntary conduct?  The Reyes court certainly views matters through the former lens–  “when a party waits until reconsideration to raise a new argument, the argument is considered waived” Reyes at *7–but one could certainly adopt the later position and still be of reasonable mind in my view.

But there is more to this story anyway.

The Reyes court also holds that it has the discretion to rule on a summary judgment motion pre-certification, one-way intervention be darned. See Reyes at *10, citing Kehoe v. Fid. Fed.Bank & Tr., 421 F.3d 1209, 1211 (11th Cir. 2005).  This is a pretty aggressive position considering–as the Reyes Court readily admits–Kehoe dealt with a defendant’s summary judgment motion. So while a defendant may choose to risk waiving the protections of one-way intervention by seeking its own ruling on a class-wide substantive issue pre-certification, that doesn’t seem to make it ok for a plaintiff to run roughshod over those protections unilaterally–which is what happened in Reyes. But Reyes reads Kehoe very broadly and apparently for the proposition that a court always has the discretion to rule on any summary judgment motion pre-certification, a determination that seems to grant district courts the discretion to will away one-way intervention altogether. Reyes buttresses this finding by noting that the Eleventh Circuit has previously reversed denial of certification in at least one case where a Plaintiff’s motion for summary judgment had already been granted. See Reyes at *11, citing Dickens v. GC Services Limited Partnership. 706 F.App’x 529 (11th CVir. 2017). While it naturally follows that such a ruling would necessarily violate the one-way intervention protections afforded to the Defendant, it doesn’t seem to follow that the Eleventh Circuit intentionally disregarded the rule since Dickens does not mention one-way intervention at all.  And Dickens certainly does not hold that district courts are free to disregard Am. Pipe & Constr. Co. v. Utah, even if it (the Eleventh Circuit panel) did so.

There is one final and interesting wrinkle to the latest Reyes ruling.  The Court finds that, as a threshold matter, the grant of summary judgment in favor of the Plaintiff on the issue of whether or not Defendant’s dialer is an ATDS is not necessarily a substantive ruling applicable to the entire class. But the class definition includes calls made by Defendant “using computer assisted dialing technology manufactured or designed by Noble” and the MSJ found “that the Noble predictive dialer, as used by BCA Financial, was an ATDS as a matter of law.” See Reyes, 2018 U.S. Dist. Lexis 80690 at *37. So maybe there’s some daylight between the class definition and the reach of the summary judgment ruling but its tough to say that the ruling won’t be dispositive as to some large portion of the class, which seems sufficient to trigger one-way intervention concerns.

This last piece of Reyes is also curious considering footnote one of the original Reyes ruling, which reads: “Moreover, it [the MSJ] concerns threshold issues that may impact the class, if it is certified. Therefore, the Court deems it prudent to rule on the summary judgment motion first.” Reyes , 2018 U.S. Dist. Lexis 80690 at *6, fn 1. So the driving impetus behind the Court granting summary judgment before certification in the first place was the Court’s belief that the ruling would have classwide impact. But the Court now finds that the ruling did not violate one way intervention because the ruling may not have such impact after all.

At bottom, the Reyes court stands as a stern reminder to defendants to be ever-vigilant in asserting one-way intervention protections. Assuming Reyes is correct that one-way intervention protections are discretionary to some degree, defendants will be much better served by asserting their rights early in a proceeding. As you might expect, a court is unlikely to reverse itself after it has put in the hard work of considering a beefy certification motion and ruling on it. So asserting the issue as soon as it becomes apparent will save the court time and might just prevent a wayward certification ruling after the class members have already had a peek at the merits of their claim.

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About this Author

Eric Troutman, Womble Dickinson, TCPA Litigation Attorney
Attorney

Eric is one of the country’s prominent class action defense attorneys and is nationally-recognized in Telephone Consumer Protection Act (TCPA) litigation and compliance.  He has served as lead defense counsel in more than 50 national TCPA class actions and has litigated nearly a thousand individual TCPA cases in his role as national strategic litigation counsel for major banks and finance companies. He also helps industry participants build TCPA-compliant processes, policies, and systems.

Eric has built a national litigation practice based upon...

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