New York District Court Applies Reyes to Squash TCPA Suit Based Upon Consent Terms Built into Sallie Mae TCPA Class Action Settlement Agreement

The Sallie Mae class settlement continues to pay major dividends for Navient Solutions (“Navient”), one of the nation’s most liberal dispensers of automated debt collection phone calls.

Back in 2012, Navient—then known as Sallie Mae, Inc.—entered into the nation’s first large-scale nationwide TCPA class-action settlement: a $24.15MM deal to resolve the TCPA claims of approximately 8,000,000 recipients of automated telephone calls. Even now, the sum is breathtaking, but at the time the settlement was entirely groundbreaking. The Sallie Mae settlement is famous in TCPA circles for opening the door to the avalanche of eight-figure TCPA class settlements that have become so prevalent over the course of the last five years. Indeed, the Sallie Mae deal became a touchstone for TCPA class-action practitioners, establishing the preferred form of TCPA class settlements—non-reversionary common fund settlements—and forming the earliest data point in the soon-to-be-established “market” price for TCPA class-action settlements.

Perhaps the most hotly-debated term of the Sallie Mae settlement, however, was one bound for obscurity rather than broad duplication. Specifically, Sallie Mae insisted on a provision in the settlement agreement stating that all class members necessarily consented to receive further calls from Sallie Mae and its legion of collectors unless the consumer opted out of the settlement then and there, or returned a specific written revocation form during the opt-out period. The term was assailed by class counsel and objectors alike and, I’ve been told, nearly held up the deal. Nonetheless, the agreement was inked with the term included and the deal narrowly met with final approval as a result. Since then, few, if any, TCPA class actions have included a similar clause, most likely due to the belief that the clause would not be enforceable and was otherwise simply not worth the headache.

For most of the ensuing five years, the clause probably wasn’t worth the headache. Case after case—initially following the common law and later following FCC rulings following the common law—held that consumers could revoke their consent in any reasonable manner, not just via a written revocation form, and seemingly no matter what their contracts said. Indeed, a handful of district court opinions suggested that contractual revocation terms were per se unenforceable. So the Sallie Mae “class consent” clause sat there quietly, year after year, seeming all-the-more useless and quixotic as time passed.  

Then, in June of this year, a spark. The Second Circuit Court of Appeals handed down Reyes v. Lincoln Automotive Financial Services, 861 F.3d 51 (2d Cir. 2017), reminding everyone that the common law does not always allow for consent to be freely revoked. Indeed, consent can be built into a contract and become just as firm and irrevocable as any other term of the agreement.  The key is whether consideration is given for the term. As I wrote at the time, this changes everything.  

For Navient, the long-dormant “class consent” clause in the Sallie Mae deal suddenly had relevance. If the term was found binding on absent class members, then Reyes seems to clearly hold that such consent cannot be unilaterally revoked. That means that any revocation effort by any of those 8,000,000 class members in the Sallie Mae deal would be invalid and the settlement would be the eternal “giving tree” of TCPA litigation. But would any judge actually find that the “class consent” term was binding on all absent class members?  On Monday of this week, Navient got the answer it was hoping for, and the decision is likely to have a big impact on how TCPA class settlements are written from now on.  

In Rodriguez v. Student Assistance Corp., 17-CV-01577 (BMC), 2017 U.S. Dist. LEXIS 183588 (E.D.N.Y. Nov. 6, 2017), Judge Brian M. Cogan issued a ruling as gritty as the cracked streets of Brooklyn outside his chamber doors. In the first published decision directly following Reyes, the Court granted summary judgment in favor of Navient in a TCPA case—disregarding allegations that the Plaintiff had “repeatedly” asked for automated calls to her cell phone to stop. The Court found that the revocation efforts were absolutely meaningless because the Plaintiff was a member of the Sallie Mae settlement and, by failing to opt out or otherwise submit the written revocation form, was bound to an eternity of debt collection calls from Sallie Mae and its corporate successors by virtue of the settlement agreement’s “class consent” clause.  This is true although there was no evidence that Plaintiff submitted a claim against the Sallie Mae settlement fund or even received notice of the settlement terms, including the “class consent” provision. As Judge Cogan reasoned, however, the class members received consideration for the “class consent” clause by being offered the opportunity to make a claim against the settlement fund. The receipt of this opportunity rendered the clause irrevocable without regard to whether or not the class member actually benefited from the settlement. Thus, Judge Cogan handed Navient the purest victory imaginable—assuring that all 8,000,000 unnamed class members in the Sallie Mae agreement irrevocably consented to receive future calls from Navient merely by virtue of their election not to opt out of it.

While Rodriguez is a real coup for Navient—and credit its lawyers for finding the right case in the right district to bring this argument—the broader impact of Rodriguez will be felt as TCPA defendants angle to benefit from similar clauses in future settlements. Will Sallie Mae add yet another time-honored provision to TCPA class settlements—with “class consent” provisions becoming standard-fare baked into template settlement forms and meeting surefire court approval?—or might sparring over the impact of Rodriguez lead to an implosion of the TCPA class settlement paradigm altogether as defendants refuse to write large checks without the “class consent” clause and the plaintiffs’ bar refuses to yield? Only time will tell.

For now, the one thing that is certain is Reyes continues to gain steam in the Second Circuit and beyond. If your institution isn’t already using consent clauses in your consumer agreements—you should be.

Eric Troutman

Eric Troutman

Eric is one of the country’s prominent Telephone Consumer Protection Act (TCPA) defense attorneys, having served as lead defense counsel on over 30 nationwide TCPA class actions and having handled hundreds of individual TCPA cases. He also “wrote the book” on TCPA defense, having co-authored the nation’s first comprehensive practice guide on the subject. In addition, he has helped spearhead the banking industry’s push for TCPA clarity before the Federal Communications Commission and has assisted on numerous appeals addressing hot-button TCPA issues.

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