TCPA and FDCPA Class Action Targets New Kind of Business: Digital Rights Enforcers

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The long-running legal battle between movie and music studios and consumers that illegally download their products got a novel twist late last week when a consumer attorney filed a class action lawsuit against a company tasked with enforcing the studios’ claims. The suit says that the company is acting as a debt collector and has violated the TCPA and FDCPA.

The case, Reif, et. al v. Rightscorp, was filed Friday in U.S. District Court for the Central District of California. In addition to asserting TCPA and FDCPA claims, the suit alleges violations of the Rosenthal Fair Debt Collection Practices Act, California’s version of the FDCPA commonly called the Rosenthal Act.

Ever since file-sharing service Napster rose to prominence at the turn of the century, producers of premium content that is easily digitized have fought to enforce their copyright claims. But only the best capitalized firms can afford the legal battles, most often Hollywood studios and major record labels.

After a series of high-profile (and high-dollar) legal wins over high volume file sharers in the mid-2000s, studios shifted their strategy to go after smaller “abusers.” Part of that strategy now is to engage with copyright enforcement firms that go after consumers on a one-on-one basis. Rightscorp is one such company.

Rightscorp, and similar companies, ask Internet service providers (ISPs) to forward notices to their customers when an alleged violation is detected. The notices often contain a settlement offer: $20 per pirated file or risk the prospect of facing a massive lawsuit that can often run well into six figures and higher. After the notices are sent, Rightscorp typically follows up directly with consumers with phone calls, often to cell phones.

In the lawsuit filed Friday, the plaintiffs contend that Rightscorp operates exactly like a debt collection agency and should be subject to regulation under the FDCPA. And because the firm uses an automated dialing system to make its call, it is also subject to rules under the TCPA.

The TCPA cause of action in the suit is relatively straightforward: Rightscorp used an artificial and/or prerecorded voice in calls to the cellular telephones of Ms. Reif and the other members of the TCPA Class, such as the call made to Ms. Reif’s cell phone by a pre-recorded voice on September 17, 2014. On information and belief, Rightscorp caused equipment having the capacity to dial numbers without human intervention to be used to make telephone calls to the cellular telephones of Ms. Reif and the other members of the TCPA Class. Rightscorp has, therefore, violated Section 227(b)(1)(A)(iii) of the TCPA.

The alleged FDCPA violations are more wide-ranging. The suit claims violations of § 1692d(5) for repeatedly calling the plaintiffs, § 1692e(5) for threatening to “escalate” a consumer’s case if they do not accept the settlement offer, § 1692e(10) for allegedly representing that a consumer’s ISP could shut off their service if they didn’t pay, § 1692(e)(11) for failing to disclose themselves as a debt collector, and a host of § 1692g(a) violations for lack of required information in written communications to consumers.

The case may or may not have legs, but the digital file-sharing community has been very vocal about the suit today in light of the filing. It is very interesting, however, that other types of businesses are being targeted using statutes that debt collectors have been grappling with for years.

 

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Posted in Collection Laws and Regulations, FDCPA, Featured Post, TCPA .

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  • avatar The New Guy says:

    That is an interesting evolution. I doubt that this will meet the definition of debt under FDCPA though, and the TCPA implications could just force them to adjust their strategy a bit without significantly affecting their overall business model.

    Not that it matters here, but companies like this would cease to be relevant if their clients would just embrace the new realities and evolve to supply the marketplace with legal, affordable alternatives to illegal downloads.

  • avatar John Smith says:

    It is a shame that we rally to the defense of consumers that shirk their responsibility to pay legitimate debts what kind of message does that send to our young. Now, it appears that we want to defend those that violate copyright laws.

    What’s next, theft of intellectual property, patent infringement and a host of other protections needed to allow progress to flow unimpeded. Isn’t it astounding that we have progressed so far, so fast because individuals who have the creative spark are protected, their thoughts, inventions, creations, stories etc. are theirs to not only profit from but to share with others that benefit from their creativity.

    Now we’re going to condone outright theft? I believe “The New Guy” would be singing a different tune if that copyright belonged to him. BTW, “New Guy” if you can steal something without any fear of retribution then how do I make my product more affordable? It’s already free!

  • avatar Kenlyn Gretz says:

    I like the idea of bringing the Music and Hollywood Industry into the TCPA battle. This could get good. A new song, “TCPA Blues” or a new movie! …;)

  • avatar The New Guy says:

    Mr Smith, you misinterpret me.

    Believing that FDCPA is a bad fit in this case is not a moral judgement in favor of the consumer.

    And believing that Hollywood is out of step with new realities is not the same as advocating for the right to steal their intellectual property.

    I am not defending the consumer “thieves”. I am criticizing their attorneys for misunderstanding FDPCA and the Hollywood studios for missing the tremendous business opportunity of legally monetizing something that consumers are currently incentivized to steal.

    Right now, they have backed themselves into a corner where they have to go after consumers who distribute illegally downloaded content. That is a small, petty strategy that leaves nobody a winner. And the tactics they are using make it even worse. Harassment and extortion are uncalled for.

    I have spent many years in both the entertainment industry and the collection industry. I am simply saying this case is a waste for both industries. They can do better.

  • avatar Commercial Guy says:

    I’m not so sure this isn’t a fit for the FDCPA, TNG. Rightscorp is a third party that is alleging that consumers owe an obligation to the original creditor, and is offering to settle that obligation for the amount of $20.00. I don’t think it’s that much of a stretch. The TCPA claims seem pretty straight forward, and difficult to defend if they are leaving pre-recorded voice mails on cell numbers. This could get very expensive for the defendant even if the FDCPA claims are thrown out, since there is no cap on damage awards under the TCPA.

    And, before I get hammered for defending thieves, I’m not. You should pay for what you get, and the claim that you didn’t know it was wrong doesn’t fly, either for the consumers who illegally downloaded copyrighted material or the “collector” who made unauthorized robo-calls to cell phones.

  • avatar The New Guy says:

    CG, this would not meet the FDCPA’s definition of debt.

    From FDCPA: “The term “debt” means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.”

    It is much more closely aligned with extortion.

    From FindLaw: “Extortion is the crime of obtaining money or property by threat to a victim’s property or loved ones, intimidation, or false claim of a right”

    There was never a transaction that created a debt as recognized under FDCPA. There is an allegation of theft, which is responded to with the threat of litigation unless the consumer pays a fee to settle.

  • avatar Commercial Guy says:

    While I agree that this is much more closely related to extortion, I am reasonably certain that the plaintiff’s argument will be that the downloading of the copyrighted material constituted the “transaction” which created the “debt” that the defendants are now trying to collect. Whether the court buys that argument or not is a different story. The case seems pretty typical for the consumer bar…throw everything you can think of against the wall and see what sticks.

  • avatar The New Guy says:

    CG, if that approach worked I think it would have stunning consequences for the industry.

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