Bais Yaakov of Spring Valley v. Peterson’s Nelnet, No. 11-0011, 2011 WL 1458779 (D.N.J. April 15, 2011).

While denying the defendant’s motion to dismiss the complaint, a District Court in New Jersey relied on the Third Circuit precedent in Landsman & Funk P.C. v. Skinder-Straus Associates, 2011 WL 1226371 (3d Cir. Apr. 4, 2011) that although the federal courts do not have federal question jurisdiction over private causes of action under the TCPA claims, Congress did not divest the federal courts of diversity jurisdiction over TCPA claims. (Editors’ Note: See the CAFA Law Blog analysis of the appellate decision in Landsman posted on July 19, 2011).

The plaintiff, a religious corporation located in New York, brought a class action in the District Court alleging that the defendant, Peterson’s Nelnet LLC, sent unsolicited faxes to the plaintiff and others similarly situated in violation the Telephone Consumer Protection Act (“TCPA”).

The defendant is a limited liability company located in New Jersey that offers test preparation and college and career planning services to high school students. The complaint alleged federal question jurisdiction based on the TCPA as well as diversity jurisdiction based on CAFA.  The defendant filed a motion to dismiss the complaint arguing that there was no federal question jurisdiction over TCPA claims.  As to diversity jurisdiction, the defendant asserted that, under a choice-of-law analysis, New York law applied to bar class actions for statutory penalty claims.

Denying the defendant’s motion to dismiss, the District Court noted that there are two traditional bases for subject matter jurisdiction in federal court: federal question jurisdiction and diversity jurisdiction.  Federal question jurisdiction applies to those civil actions arising under the Constitution, laws, or treaties of the United States.  Federal diversity jurisdiction applies where the parties satisfy diversity of citizenship and the amount in controversy meets the statutory minimum specified in 28 U.S.C. §1332.  

The Court observed that the Third Circuit has previously held in ErieNet, Inc. v. Velocity Net, Inc., 156 F.3d 513, 519 (3d Cir. 1998) that federal district courts do not have federal question jurisdiction over TCPA claims. 

The Third Circuit, however, has since stated, in Landsman & Funk P.C. v. Skinder-Straus Associates,  2011 WL 1226371, at **4, 14, 15 (3d Cir. Apr. 4, 2011) that “Congress did not divest the federal courts of diversity jurisdiction over private causes of action under the TCPA.”  

The Court went on to hold that, because the TCPA is a federal cause of action, there is no need to engage in a “choice-of-law analysis”. Rather, federal law regarding class actions would be applied in federal courts, not state law. Accordingly, the Third Circuit in Landsman concluded that a TCPA class action may proceed as long as Fed. R. Civ. P. 23’s prerequisites are met.  The Third Circuit, however, stated that “whether the class could potentially fit within Rule 23” should not have been decided on a motion to dismiss, when there had been no motion for class certification and no discovery.

The Court found that here, the complaint alleged diversity jurisdiction under CAFA, 28 U.S.C. §1332(d). The parties were diverse, and that the plaintiff’s allegation that the defendant had sent well over 10,000 unsolicited and/or solicited fax advertisements, would be sufficient to meet the $5 million threshold for diversity jurisdiction, given that the TCPA provides for penalties of $500 per violation.  

Based on the Landsman decision, diversity jurisdiction under §1332(d) provides a sufficient basis for the Court to exercise jurisdiction over this matter.  Accordingly, the Court found that the plaintiff’s class action might proceed assuming Rule 23’s requirements were met.

The Court, however, remarked that it would be premature to decide the class certification issue on a motion to dismiss, prior to any discovery.  Accordingly, the Court denied the defendant’s motion to dismiss for lack of subject-matter jurisdiction.