Fighting off telemarketer fraud counterclaims

A frequent topic on this blog is playing defensive ball when suing telemarketers. Sometimes getting countersued is unavoidable due to the nature of the suit. A well know TCPA defense attorney reflexively countersues whenever possible as part of his negotiating style.

We can study lawsuits where these claims were defeated to replicate their results. Today we study Western District of Washington federal case Walker-Schaut v. Lido Labs. Holding Co., C23-5944 BHS, 3 (W.D. Wash. Sep. 26, 2024) for some takeaways and caselaw.

First, a little background. In this case the plaintiff sued Lido Labs Holding Company for 65 spam texts promoting various commercial services under the guise of free assistance on various topics while her number was registered on the national do-not-call-registry (NDNCR). She asserted claims under Washington State's Commercial Electronic Mail Act (CEMA) and the TCPA. The first claim was under CEMA, a NDNCR claim under 47 C.F.R. § 64.1200(c)(2), a failure to identify claim under 47 C.F.R. § 64.1200(d)(4), and an ATDS claim under § 64.1200(a)(1)-(2).

Lido was defended by Eric Troutman and his first move was moving to dismiss every claim. The Lico court made some good rulings, first on the CEMA claim:

Four subsequent decisions in this District-two by Judge Pechman-have held that text messages that do not explicitly seek to sell a good or service may nevertheless be commercial under CEMA, if they are designed to “promote, or otherwise have the purpose of promoting future sales of some good or service.” Bottoms v. Block, Inc., No. C23-1969 MJP, 2024 WL 1931690 at 6 (W.D. Wash., May 2, 2024) (emphasis added) (citing Moore v. Robinhood Financial LLC, No. C21-1571 BJR, 2022 WL 3082969, at 5 (W.D. Wash. Aug. 3, 2022)); see also Wright v. Lyft, Inc., No. C14-0421 MJP, 2016 WL 7971290, at 5 (W.D. Wash. Apr. 15, 2016) (text offering “free” app that promoted purchase of future services was commercial); Gragg v. Orange Cab Co., No. C12-0576 RSL, 2013 WL 195466, at 4 (W.D. Wash. Jan. 17, 2013) (same).

Under these well-reasoned decisions and Washington's CEMA, Walker-Schaut has plausibly alleged that the purpose of Lido Labs' texts was to promote the purchase of future services; she plausibly alleges she was confronted with offers to purchase such services when she clicked the embedded link, before she could access the “free” assistance touted in the text.

Troutman's second argument was simply loony and the court shot that down quickly.

In response to Lido Labs' first argument, Walker-Schaut correctly contends that the TCPA has always included the term “message” in its definition of the term “telephone solicitation.” Dkt. 16 at 8 (citing 47 U.S.C. § 227(a)(4)). She accurately asserts that the FCC's 2023 Rulemaking process expressly explained that it was “clarifying”-not expanding-and acknowledged that its effort was to “codify the National DNC Registry's existing protections to text messages.” Id. at 9 (citing In Re: Targeting and Eliminating Unlawful Text Messages, Second Report and Order, 2023 WL 8826682, at *7, ¶ 26).

Walker-Schaut also correctly contends that for a decade, courts have consistently held that text messages are “telephone solicitations” under the TCPA. Id. at 8 (collecting cases). And Lido Labs has cited no authority supporting its claim that text messages were not TCPA “telephone solicitations” until the FCC's November 2023 “clarification.” Its motion to dismiss Walker-Schaut's DNCR claim on this basis is DENIED.

Troutman's third argument was no better:

She thus demonstrates that § 64.1200(d)'s prohibitions are not limited to artificial or pre-recorded voice calls. Furthermore, Walker-Schaut argues and demonstrates (as discussed above) that the FCC's recent 64 C.F.R. § 1200(d) rulemaking is intended to clarify that the TCPA applies to text messages. Dkt. 16 at 11 (citing In Re: Targeting and Eliminating Unlawful Text Messages, Second Report and Order, Appendix B, 2023 WL 8826682, at *31)).

Lido Labs' motion to dismiss Walker-Schaut's “failure to identify” claim based on its claim that § 64.1200(d)(4) applies only to artificial or pre-recorded calls, and therefore not to text messages, is DENIED.

They had an alternative third argument - § 64.1200(d)/§ 64.1200(d)(4) was not promulgated under § 227(c). This has become so well settled in this district that their argument is frivolous and it was also denied. Troutman was so desperate he misquoted a case "Walker-Schaut also demonstrates that Lido Labs' motion materially misquotes Charvat." But this district likes telemarketers so beyond a passing comment the court didn't trouble him for the obvious attempt as misleading the court. If you need fodder for fighting off a § 64.1200(d)/§ 64.1200(d)(4) motion to dismiss, see several of my other blog posts here and here.

Amazingly Walker-Schaut won on her ATDS claim, in no small part because it was the second time Troutman raised a new issue in his reply brief. But back to the point of the article, Troutman did his usual counterclaim, Walker-Schaut moved to dismiss, and she won!

In part Walker-Schaut got lucky.

Lido fails to plausibly allege that Walker-Schaut consented to receiving text messages from Lido. The hyperlink that Lido cites in support of its counterclaim (https://bcd.us-unemployment-resources.com/tc.php) is to the terms and conditions of a website entitled, “US UNEMPLOYMENT RESOURCES.” This website is comprised of five webpages, and the services provided by this website are not entirely clear from a review of these webpages.

The terms and conditions of this website state that the website functions to share promotions and offers from its “advertisers,” although it does not describe who those advertisers are or what services they provide

Although the website states that its operator “make[s] regular blog postings advising users of new promotions and offers,” there is no section of the website devoted to blog posts.

The terms and conditions also provide that users may “sign up” on the website and that, by doing so, they will be able to receive undisclosed “samples or freebies” if the user “specifically sign[s] up” to receive those “samples or freebies”

Nothing on the telemarketer's website suggests that, by “signing up,” a user agrees to be contacted by any company, including Lido, about its services. This webpage accordingly does not appear to be a means through which users may expressly agree to receive messages from Lido. In fact, nowhere on the website, including in its terms and conditions, is Lido mentioned or its “services” described. Lido accordingly fails to plausibly demonstrate that Walker-Schaut consented to receiving text messages from Lido about Lido's services, or that she was “interested in services from Lido.” Bullet dodged.

There are a few technical arguments in the opinion that might apply in cases so look those over. One of them was Lido's argument:

if Walker-Schaut consented to receiving the disputed text messages, then she impliedly promised to not sue Lido in the future for sending her text messages in violation of the TCPA. Yet it is well established in Washington that “[a] promise of future performance is not a representation of an existing fact and will not support a fraud claim.” W. Coast, Inc. v. Snohomish Cnty., 112 Wn.App. 200, 206 (2002)

A more general useful argument is on damages.

Lido also fails to plausibly allege damages. Lido claims that it “has been damaged by Plaintiff's fraudulent action in the form of ongoing fees and costs, prior expenditures, reputational damage, business disruption, and the costs of investigation and defense.” Dkt. 32, ¶ 18. But in Washington, attorney fees and costs are not recoverable unless a contract, statute, or ground in equity expressly authorizes their recovery. See City of Seattle v. Hammon, 131 Wn.App. 801, 805 (2006) (“‘Attorney fees are recoverable only when authorized by a private agreement of the parties, by statute or a recognized ground of equity.'” (quoting State v. Keeney, 112 Wn.2d 140, 142 (1989)); Johnson v. Horizon Fisheries, LLC, 148 Wn.App. 628, 633 (2009) (“Under the ‘American rule' followed in Washington, litigation costs are only recoverable when authorized by statute, rule, or case law.”). Lido Labs fails to cite any authority permitting it to recover attorney fees and costs under these circumstances.

To the extent Lido alleges that it has suffered damages “in the form of . . . prior expenditures, reputational damage, business disruption, and the costs of investigation” independent of attorney fees and litigation costs, Dkt. 32, ¶ 18, it does not state a plausible claim for damages. These vague and conclusory assertions are not supported by any specific factual allegations explaining exactly what these damages are in the context of this case and how Walker-Schaut's conduct caused them. This is plainly insufficient to survive a Rule 12(b)(6) motion to dismiss. See, e.g., Iqbal, 556 U.S. at 678; Twombly, 550 U.S. at 555; Vasquez, 487 F.3d at 1249.

We learn from every case we can on how to dismiss counterclaims brought to harass TCPA plaintiffs for exercising their right to sue the perpetrators. The community needs to hound the judges with motions to dismiss when when possible build appellant law to tie the hands of judges who don't want to.

Speaking of bad judges, another Western District of WA judge allowed damages on a fraud claim to proceed, and this judge disagreed: Insofar as the Alleviate Tax order concludes that such damages were properly sought through a fraud claim, the Court respectfully disagrees with it. That judge and the Alleviate Tax plaintiff had a history prior to the Alleviate Tax order, the pro-se plaintiff had successfully appealed the judge in one case and was in the process of appealing the same judge in another so personal animosity may have driven the bad ruling because the Walker-Schaut judge cited case law to support his ruling and the Alleviate Tax judge did not.

If you are in a court with thin skinned judges looking to settle personal scores there may be little you can do but wait for the opportunity to appeal a bad ruling.

Do you have a question or a telemarketing, debt collection, or bankruptcy case that would make a great blog article? We might even review your pro-se complaint or motion in a blog post. Email peter@nwdebtresolution.com and/or nathen@nwdebtresolution.com and we may answer it for everyone!

Are telemarketers harassing you in Washington, Oregon, or Montana? My Washington State TCPA plaintiff law practice can help, just give us a call at 206-800-6000 or email peter@nwdebtresolution.com.

The thoughts, opinions and musings of this blog are those of Peter Schneider, a consumer advocate and Washington State plaintiff's TCPA attorney at Northwest Debt Resolution, LLC. They are just that, his thoughts, opinions and musings and should be treated as such. They are not legal advice. If you are looking to file a lawsuit for TCPA violations and unwanted calls please contact me for a consultation.