TCPA Tipping Point?: Keller Williams Baits Disastrous N.C. ATDS Ruling that Could Send the Fourth Circuit Veering Toward Marks
The Czar is cranky.
Just a few weeks ago I discussed how the Trump campaign created awful ATDS case law in the Eighth Circuit with an ill-conceived (IMO) bid to challenge a TCPA robotext suit at the pleadings stage. Apparently the folks at Keller Williams didn’t read that article and now they—and the rest of us—are facing a similar (avoidable) mess in the Fourth Circuit.
In Hayhurst v. Keller Williams Realty, 1:19CV657, 2020 U.S. Dist. LEXIS 128877 (M.D.N.C. July 22, 2020) the Court directly and expressly followed Marks and rejected Gadelhak in denying a Defendant’s motion to dismiss a putative TCPA class action at the pleadings stage, that probably never should have been filed. The suit alleged that Keller Williams—through its third-party affiliates—were cold calling potential consumers with robocalls and marketing pitches. Not the most savory of allegations to attempt to make new case law folks.
Importantly, the Fourth Circuit Court of Appeals has yet to rule on the TCPA’s ATDS definition but the case law had developed fairly favorably. Although TCPAWorld.com officially labeled the Fourth Circuit as yellow—meaning “undecided”—there was good reason to think district courts in the footprint might lean toward Gadelhak and away from Marks. But that doesn’t mean a defendant in a TCPA class action ought to take a shot at defeating a TCPA claim at the pleadings stage—simply a terrible idea. As I explained in my article discussing the Trump suit:
[I]n a TCPA class action the issue of whether an ATDS was used should rarely be raised at the pleadings stage because it risks highlighting (indeed resolving) a critical common issue in favor of class certification. Most experienced TCPA class action practitioners, therefore, bring such challenges only after certification has been resolved or: i) when you’re dealing with a sure thing at the pleadings stage; or ii) in settings where the ruling won’t apply across the class.
In Pederson, however, the Trump Campaign was not facing a sure thing and was facing a classwide issue. But they took their shot anyway. The Eighth Circuit Court of Appeals–where the D. Minn. was located–had not yet ruled on the issue of what constitutes an ATDS. And while one judge of the D. Minn. had ruled on the issue–rejecting Marks and requiring random or sequential number generation–that was by no means binding on the Chief Judge of the District who was set to decide Pederson.
Nonetheless, the Trump Campaign took its ATDS shot early. Rather than wait until an evidentiary record would be available at the MSJ phase–or after defeating certification or winnowing down the class– the Campaign argued that the complaint had to be dismissed because it did not allege random or sequential number generation as to any texts to any class member. Daring.
Keller Williams makes this same play in Hayhurst and the result is equally disastrous—the Court determined a critical substantive issue that is common to the entire class against the Defendant pre-certification. So one way-intervention issues are waived and a critical common issue is highlighted and decided against the defense. Indeed, there’s simply no way the Defendant can now argue that the systems used by its affiliated agents are not subject to the TCPA—the Court has affirmatively decided the critical issue against it. My goodness.
It gets worse. Remarkably, KW finds itself in this position despite the fact that the Supreme Court is currently set to rule on the TCPA’s ATDS definition next term. So while most experienced TCPA counsel are assiduously avoiding ATDS rulings and seeking stays pending the SCOTUS review, KW has rushed in and handed the Marks camp a completely avoidable (and big) victory ahead of next month’s briefing in the Facebook appeal. And KW will now be stuck litigating the case under the shadow of the SCOTUS review, when the whole case probably would have been stayed had they but asked.
Adding to the fun, KW also handed Plaintiff’s counsel—the ever dangerous Avi Kaufman—a big win on agency issues. While the Court’s ruling on vicarious liability is less substantive—and should carry less weight at summary judgment—the allegations of the complaint in Hayhurst robustly asserted control by KW over its agents. With such a stacked deck, there was simply no reason to risk creating bad law-of-the case– especially since vicarious liability issues are absolutely critical in suits involving purported real estate brokerage liability for acts by independent agents. So it is baffling (at least to me) that KW would risk drawing a negative ruling on this critical substantive issue with a risky pleadings stage attack in a putative class action, nonetheless. Yet that is exactly what happened in Hayhurst and it is decidedly unclear whether KW will be able to recover at later stages of the case.
Sorry for the bad news folks. I’ve said it many times, and I’ll say it again. TCPA class action defense is not for the faint of heart or the green of horn.