Recent Developments in New York Law

Article excerpt

Foxhall Realty Law Offices, Inc. v. Telecommunications Premium Services, Ltd.: The Second Circuit concludes that New York State courts have exclusive jurisdiction over private rights of action asserted under 227 of the Federal Telephone Consumer Protection Act of 1991.

In 1991, Congress explicitly prohibited the use of telecommunications technology1 by the telemarketing industry2 to forward unsolicited advertisements to consumers.3 Congress recognized that the facsimile ("fax") machine's basic design, to process and print any message sent to its number, allowed the recipient of unsolicited fax advertisements to be harmed in two direct ways. "First, it shifts some of the costs of advertising from the sender to the recipient. Second, it occupies the recipient's facsimile machine so that it is unavailable for legitimate business messages while processing and printing the junk fax.4' To prevent such harm, Congress prohibited telemarketers from sending unsolicited advertisements via fax machine5 and provided private individuals and entities with a right of action to seek both an injunction and damages against those sending future advertisements.6

In Foxhall Realty Law Offices, Inc. v. Telecommunications Premium Services, Ltd.,7 the defendant, Telecommunications Premium Services ("TPS"), purchased a list containing the telephone numbers of over 66,000 fax machines used by businesses in the metropolitan tristate area,8 including that of the plaintiff, Foxhall Realty Law Offices, Inc. ("Foxhall").9 TPS sent unsolicited fax advertisements to Foxhall and other businesses whose fax numbers appeared on the list.10 Foxhall filed a class action suit in federal court on behalf of those New York residents who received fax advertisements from TPS without prior consent.11 The complaint alleged that TPS's action violated 227 of the Telephone Consumer Protection Act of 1991 ("TCPA"), which provides, in pertinent part, that "use [of] any telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine" is prohibited.12

Under review in Foxhall Realty, was the proper interpretation of the word "may"13 within 227(b)(3) that creates the private right of action.14 The provision states:

A person or entity may, if otherwise permitted by the laws or rules of [sic] court of a State, bring in an appropriate court of that State

(A) an action based on a violation of this subsection or the regulations prescribed under this subsection to enjoin such violation,

(B) an action to recover for actual monetary loss from such a violation, or to receive $500 in damages for each such violation, whichever is greater, or

(C) both such actions.15

More precisely, the court sought to determine whether Congress, in choosing the word "may,"16 intended to create concurrent federal and state jurisdiction, or place exclusive authority with state courts to decide private actions brought under the TCPA.17 The United States District Court for the Southern District of New York granted TPS's motion to dismiss, and held that Congress did not intend to confer upon federal courts the authority to decide the private claims.18 The district court found that federal courts, because they are of specific jurisdiction,19 must be granted the power by Congress to review claims arising under a federal act.20 The absence of language denying the federal courts jurisdiction, however, does not prove that Congress intended the federal courts to adjudicate claims arising under the TCPA. The Second Circuit Court of Appeals affirmed,21 and in so doing, "reach[ed] `the somewhat unusual conclusion that state courts have exclusive jurisdiction over a cause of action created by' a federal [act]."22 As a result, private individuals and entities are precluded from seeking redress in federal court for injuries resulting from violations of the "junk" fax provision of the TCPA.23

It is submitted that the Second Circuit Court of Appeals erred when it held that state courts possess the exclusive right to adjudicate private claims brought under the TCPA. …