Posted by Ronald London

The U.S. Court of Appeals for the Seventh Circuit, which sits in Chicago and encompasses Illinois, Indiana and Wisconsin, recently issued a decision in Brill v. Countrywide Home Loans, Inc., No. 05-8024, holding that federal courts may hear lawsuits arising out of consumer claims for redress under the Telephone Consumer Protection Act (“TCPA”), which regulates unsolicited commercial faxes and phone calls. The Seventh Circuit breaks with six other federal courts of appeal that have held jurisdiction over such consumer claims lies exclusively in state court and cannot be lodged in or removed to federal court. The Seventh Circuit decision is significant in that it creates the kind of “split” among circuits that often forms the basis for the Supreme Court to exercise discretionary review, and because it is the first federal appeals court TCPA decision that post-dates the Class Action Fairness Act of 2005.

Brill, one of the recipients of almost four thousand “junk faxes” Countrywide sent in violation of the TCPA, sought to represent a class of recipients by filing a class action in Illinois state court, which Countrywide sought to remove to federal court under the Class Action Fairness Act. But when the case got to the trial-level federal court, the judge ordered it remanded to state court on grounds that TCPA suits cannot be removed because, he held, the TCPA makes state jurisdiction exclusive. This holding was consistent with those issued from 1997 to 2000 by federal appeals courts in the Second, Third, Fourth, Fifth, Ninth and Eleventh Circuits. These courts all cited the fact that the TCPA provision that creates a private cause of action (i.e., a way for consumers to seek damages for unwanted faxes rather than relying on FCC enforcement action or lawsuits by state attorneys general, neither of which permit direct consumer recovery) states that “a person or entity may, if otherwise permitted by the laws or rules of a State,” bring suit “in an appropriate court of that State.” This, the Circuit Courts reasoned, was inserted into the TCPA to preclude suits in federal court, which otherwise are generally authorized when a question or dispute arises under a federal statute like the TCPA.

But the Seventh Circuit noted that these holdings all predated the Class Action Fairness Act, as well as two key Supreme Court decisions from 2005 and 2003 that speak to the issue – Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, and Breuer v. Jim’s Concrete of Brevard, Inc. Grable resolved a conflict in the Supreme Court’s own decisions by holding that federal jurisdiction does not depend on existence of a private right of action under federal law, and Breuer held that statutory permission to litigate a federal claim in state court does not foreclose removal under federal question jurisdiction. The Seventh Circuit went on to reason that, while other courts writing before Breuer wondered what the above TCPA language meant if it does not confer exclusive state court jurisdiction (since suits generally are permitted in state court under federal statutes if not explicitly barred), revisiting the TCPA consumer-suit provision under Breuer was in order.

Accordingly, the Seventh Circuit pointed out, the provision does not say state court jurisdiction is “exclusive” for consumer suits, which is the case in a related TCPA provision that permits states themselves to bring suit based on a pattern or practice of TCPA violations. That provision states that federal “district courts … have exclusive jurisdiction over all civil actions brought” by such state officials. It would make no sense, the Seventh Circuit held, to make federal courts the exclusive venue for suits by states, but state courts the exclusive venue for consumers. Moreover, it noted, the state-officials provision is explicit about exclusivity, while the consumer-suit is silent. Accordingly, the Seventh Circuit found the “natural inference” is that the state forum mentioned with respect to consumer suits is optional rather than mandatory, and the reference to actions being filed in state court “if otherwise permitted by the laws or rules of court of a State” implies that jurisdiction is available under general rules governing suits in federal courts as well. In sum, the Seventh Circuit concluded that the contrast between the two provisions is “baffling” unless one provides exclusivity and the other does not. It thus reversed the lower federal court decision and ordered it to decide Brill v. Countrywide on the merits.