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District Court in Junk Fax Suit Stays Proceedings Pending Supreme Court Ruling TCPA Jurisdiction

Friday, September 30, 2011

John Haley | Bloomberg Law Bais Yaakov of Spring Valley v. Peterson's Nelnet, LLC, Civ. No. 11-0011, 2011 BL 232423 (D.N.J. Sept. 12, 2011) The U.S. District Court for the District of New Jersey issued a stay of proceedings in a putative Telephone Consumer Protection Act class action, pending decisions by the Supreme Court and the Third Circuit resolving the question of whether federal courts have federal question jurisdiction in TCPA claims.

Supreme Court Grants Certiorari in TCPA Case

The plaintiff in this case filed a putative class action against Peterson's Nelnet, LLC, for sending unsolicited faxes without opt-out notices in violation of the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. § 227. Peterson's Nelnet moved to dismiss, claiming federal courts lack federal question jurisdiction over TCPA claims. In support Peterson's cited ErieNet, Inc. v. Velocity Net, Inc., 156 F.3d 513, 519 (3d Cir. 1998). Peterson's also asserted that the court was required to apply New York state law, which bars class actions for statutory penalty claims. After Peterson's filed its motion to dismiss, the Third Circuit held that federal courts lack federal question jurisdiction over TCPA claims, although they may exercise diversity jurisdiction. See Landsman & Funk P.C. v. Skinder-Strauss Assocs., 640 F.3d 72, 78 (3d Cir. 2011). The district court found diversity between the two parties, and so denied Peterson' motion to dismiss, in light of the Third Circuit's ruling. After the court denied Peterson's motion, the Third Circuit vacated its decision in Landsman & Funk and scheduled an en banc rehearing. The Third Circuit then postponed its en banc hearing until the U.S. Supreme Court issues a decision in Mims v. Arrow Financial Servs., LLC, No. 10-1195, 2011 BL 168102 (U.S. June 27, 2011). In that case the court is expected to resolve the question of whether federal question jurisdiction exists in private TCPA claims. After the Third Circuit postponed its en banc hearing in Landsman & Funk, Peterson's filed a motion to stay the proceedings.

Court Finds Stay Would Avoid Waste of Resources

Courts deciding whether to issue a stay should consider "whether a stay will simplify issues and promote judicial economy, the balance of harm to the parties, and the length of the stay." Yaakov at 3 (quoting McDonald v. Novartis Pharmaceuticals Corp., 2007 BL 160634 (D.N.J. Nov. 20, 2007). The court found that a stay would simplify the issues and avoiding wasting resources because, if the Third Circuit concludes that a choice-of-law analysis is appropriate and affirms the district court's ruling that New York law bars TCPA class actions, this case would be dismissed. The court did not agree with Bais Yaakov's claim that it would be prejudiced by the possible loss of third-party telephone records, because they are generally only kept for 18 months. The court observed the records had already been destroyed, so a stay would not be helpful. The court observed that a decision by the Supreme Court in Mims may come in the 2011-2012 term, which "is a substantial period of time," but "not excessive," considering decisions by the Supreme Court and Third Circuit would likely resolve dispositive jurisdictional questions in the present case. Id. at 4. Therefore the court granted the motion to stay the proceedings.
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