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Portuguese American Leadership Council of the United States, Inc. v. Investors' Alert

September 11, 2008

PORTUGUESE AMERICAN LEADERSHIP COUNCIL OF THE UNITED STATES, INC., APPELLANT,
v.
INVESTORS' ALERT, INC., ET AL., APPELLEES.



Appeal from the Superior Court of the District of Columbia (CA-3479-01) (Hon. Cheryl M. Long, Trial Judge).

The opinion of the court was delivered by: Ruiz, Associate Judge

Argued June 7, 2007

Before RUIZ, FISHER, and THOMPSON, Associate Judges.

This appeal stems from the dismissal of appellant's action for money damages and attorney's fees for alleged violations of the Telephone Consumer Protection Act of 1991, 47 U.S.C. § 227, ("TCPA" or "Act") which prohibits the sending of unsolicited advertisements to fax machines. See id. § 227 (b)(1)(C). Appellant, a non-profit organization located in the District of Columbia, filed a class action on behalf of non-profit organizations and others located in the District who have received unsolicited faxes -- newsletters titled "Investors' Alert" -- from appellees. The trial court granted appellees' motions to dismiss after interpreting the TCPA provision that private actions may be filed in state courts "if otherwise permitted by the laws or rules of Court of a State" to mean that a state (which under the TCPA includes the District of Columbia) must affirmatively adopt enabling legislation opting to permit private lawsuits to be brought under the Act -- something the District of Columbia has not done. Alternatively, the trial court based its dismissal of the complaint against some of the defendants on a determination that they were "service providers" not liable under the TCPA for sending the unsolicited faxes.

We interpret the TCPA differently and hold that private causes of action may be brought in Superior Court under the Act without the need for enabling legislation in the District of Columbia. As the TCPA provides a legal basis for appellant's claims, the trial judge's dismissal of the complaint for failure to state a claim was legal error. We also reverse as premature the trial court's dismissal on the alternative ground that some of the defendants acted only as "service providers," and therefore are not liable under the Act. The complaint alleged otherwise and, in the absence of discovery, the trial court did not have the information necessary for a full appraisal of their roles and activities in the development and distribution of the unsolicited faxes. Accordingly, we reverse and remand the case for further proceedings.

I.

The complaint alleges that from 1997 to 2001, Investors' Alert, Inc., a company that publishes a newsletter with stock tips titled "Investors' Alert," sent out as many as 50,000 unsolicited faxes a day to a wide number of facsimile machines, including those used by appellant and other members of the purported class.*fn2 According to the complaint, the newsletters are written by Thomas E. Loyd under the company names Loyd Financial Consulting and Access Financial Consulting. A typical newsletter describes a company and predicts that its stock will soon jump in price. The complaint alleges that the purpose behind the stock tips was to raise the price of Loyd's low-value stocks, which he would then sell en masse. This is known as a "pump and dump" stock manipulation scheme.*fn3

In addition to Investors' Alert, Inc., twelve defendants are alleged to have participated in the distribution of the unsolicited newsletters. See note * on p. 1. One group -- Loyd Financial Consulting, Access Financial Consulting, and Pecan Tree Consulting -- was located in Texas and controlled by Loyd. Another group includes World Wide Marketing, Inc., Media Stealth.com, LLC, Michael Cole, and Douglas Black, all hired by Loyd as marketers. Texas companies Cynet, Inc. and Cynet of Texas, Inc., as well as Florida company Vision Lab Telecommunications, are alleged to have prepared and faxed the newsletters. Loyd is named as an individual defendant. The complaint also alleges that an unnamed securities promoter (defendant "John Doe") hired Loyd Financial to issue articles about several stocks, and sold Loyd's stocks.

II.

The TCPA, enacted by Congress in 1991, prohibits the sending of unsolicited faxes containing advertisement. See 47 U.S.C. § 227 (b)(1)(C). The Act seeks to address the increased use of automated telephone equipment to make telephone calls in bulk and fax unsolicited advertisements that cross state lines and fall outside the regulatory jurisdiction of individual states. In introducing one of the bills that would eventually become law, its sponsor, Senator Hollings of South Carolina, noted:

The telemarketing industry appears oblivious to the harm it is creating. Two months ago, a representative of the Direct Marketing Association said on television that telemarketers have a right to call us in our homes. This is absurd. I echo Supreme Court Justice Louis Brandeis, who wrote 100 years ago that "the right to be left alone is the most comprehensive of rights and the one most valued by civilized man."

Mr. President, I originally introduced this bill on July 11 of this year. Since then, my constituents in South Carolina and citizens around the country have deluged my office with letters of support for this bill. Senator Inouye, the chairman of the Communications Subcommittee, held a hearing on the bill on July 24. Not one party at that hearing testified in opposition to the bill. Because of the enormous public support, the bill was ordered reported by the Commerce Committee, which I chair, and without objection on July 31.

Mr. Steve Hamm, administrator of the Department of Consumer Affairs in South Carolina, informed me that his office receives more complaints about computerized telephone calls and 900 numbers than any other problems. Despite the fact that South Carolina recently passed legislation to protect consumers from unwanted computerized calls within our State, South Carolina consumers continue to suffer from computerized calls made from outof-State. The State law does not, and cannot, regulate interstate calls. Only Congress can protect citizens from telephone calls that cross State boundaries. That is why Federal legislation is essential.

137 Cong. Rec. 30821.

At the time the federal statute was being considered, states had begun to take action to restrict unsolicited telemarketing practices. See S.Rep. No. 102-178 at 3; H.Rep. No. 102-317, 1st Sess., at 25 (1991). The District of Columbia, for example, in 1991 banned the use of automated telephone dialing systems for commercial solicitation, see D.C. Code ยง 34-1701 (2001) ("A person may not use an automated dialing, push-button, or tone-activated address signaling telephone system with a prerecorded message for the sole purpose of: (A) Soliciting a person over the telephone to purchase or lease goods, services, or real property . . . ."), ...


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