"Fail Safe" Class Definitions Are Improper Under the Telephone Consumer Protection Act

"Fail Safe" Class Definitions Are Improper Under the Telephone Consumer Protection Act

Companies faced with Telephone Consumer Protection Act ("TCPA") class action claims should consider whether the plaintiff's proffered class definition is subject to attack as being an improper "fail-safe" class, i.e., a class in which the class is (impermissibly) defined so that the class includes only members whose claims would be successful on the merits. See generally Zarichny v. Complete Payment Recovery Servs., Inc., No. 14-3197, 2015 BL 14031, at *5 (E.D. Pa. Jan. 21, 2015) (rejecting proffered fail-safe class definition).

The law has long recognized the impropriety of so-called fail-safe class actions. As summarized in a leading Sixth Circuit decision, "a class definition is impermissible where it is a 'fail-safe' class, that is, a class that cannot be defined until the case is resolved on its merits." Young v. Nationwide Mut. Ins. Co., 693 F.3d 532, 538 (6th Cir. 2012)(citing Randleman v. Fidelity Nat'l Title Ins. Co., 646 F.3d 347, 352 (6th Cir. 2011)). A "fail-safe" class "includes only those who are entitled to relief." Young, 693 F.3d at 538. "Such a class is prohibited because it would allow putative class members to seek a remedy but not be bound by an adverse judgment—either those 'class members win or, by virtue of losing, they are not in the class' and are not bound." Id. (quoting Randleman, 646 F.3d at 352).

The importance of that settled rule was recently underscored in the Zarichny matter, a putative class action under the TCPA.

The plaintiff in Zarichny alleged that she had received 11 debt-collection calls from the defendant debt-collection service. The plaintiff also alleged that these calls "appear[ed] to have been initiated by an automatic telephone dialing system." Id. at 3. Plaintiff then filed a putative TCPA class action on behalf of all persons "who received one or more telephone calls from [d]efendants on the individual's cellular telephone that was initiated using an automatic telephone dialing system without prior consent." Id. at 11 (internal quotation marks omitted).

The defendant moved to strike the class allegation, arguing that the proffered class definition was an impermissible "fail-safe" definition. Such a fail-safe class, the defendant argued, would create a situation in which a party would either have a successful claim against the defendant and therefore be included as a class member or would be excluded from the class, not be bound by the court's judgment, and be free to pursue its own claim against the defendant.

The court agreed that the proposed class definition in Zarichny was an impermissible fail-safe class. Id. at 12. The court further noted that class actions are intended to be efficient and to eliminate administrative burdens. When determining class membership would require "extensive and individualized fact-finding or 'mini-trials,'" then a class action is not appropriate. Id. at 13. The court found that determining whether potential class members had consented to being called by the defendant would require this type of extensive fact finding, and thus struck the plaintiff's class allegations.

As suggested in Zarichny, many plaintiffs may attempt to glide over the practical and constitutional issues inherent in launching a class action where the class definition ultimately collapses with the merits. The temptation for a plaintiff to do so in TCPA cases may be especially strong, as the legality of the conduct in "no consent" TCPA cases often hinges precisely on whether consent had been obtained.

Zarichny joins a growing body of case law that rejects "fail-safe" class actions in the TCPA context and highlights the importance of critically examining and challenging proffered class definitions in TCPA matters.

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