Rule 11 & § 1927 Sanctions: Court Abuses Discretion When No Reasonable Person Would Agree with It (7th Cir.)—Failure to Disclose Named Plaintiff Is Member of Firm Representing Her Borderline But Failure to Sanction ≠ Abuse of Discretion

Blow v. Bijora, Inc., 2017 U.S. App. LEXIS 7926 (7th Cir. May 4, 2017):

In May 2011, Nicole Strickler brought this class-action lawsuit against Chicago-based retailer Bijora, Inc., doing business as Akira.1 Strickler was later replaced as named plaintiff by Nicole Blow, who alleged that Akira's practice of sending promotional text messages violates the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. § 227, and the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1-12, and sought approximately $1.8 billion [*2]  in damages. The district court ultimately certified a class of individuals with a series of Illinois telephone area codes who had received automated texts from Akira in the preceding four years. After Strickler filed her third amended complaint, Akira impleaded the company that supplied its software for the text transmissions, Opt It, Inc. Opt It then settled its claims with Strickler, who was replaced by Blow as the named plaintiff in the suit against Akira. On Blow and Akira's cross motions for summary judgment, the district court ultimately granted summary judgment in favor of Akira after concluding that Blow had failed to demonstrate that Akira used an automatic telephone dialing system in violation of the TCPA. Blow appeals, and Akira cross-appeals, challenging the class certification and renewing its request for sanctions against Blow's counsel for alleged misconduct and frivolous filings. As detailed below, we affirm the judgment of the district court, although on different grounds.

1   We follow the defendant's lead and refer to it by its recognized business name, Akira.

I.

In 2002, Eric Hseuh founded Chicago-based apparel retailer Akira. The boutique women's clothing and accessory store has continued to expand since that time and now boasts over twenty retail locations [*3]  in the Chicagoland area. In 2009, Chicago-based software company Opt It, Inc. approached Akira and offered its text marketing services to the clothing chain. Akira hired Opt It to use its software text-messaging platform to connect with Akira customers and inform them of promotions, discounts, and in-store special events such as parties. Using a variety of methods, Akira gathered its customers' cell phone numbers for Opt It to key into its messaging platform. Specifically, Akira customers could opt in to its "Text Club" by providing their cell phone numbers to Akira representatives inside stores, by texting the word "Akira" to an optin number posted in Akira stores, or by filling out an "Opt In Card." The card stated that, "Information provided to Akira is used solely for providing you with exclusive information or special offers. Akira will never sell your information or use it for any other purpose."

Opt It's software platform used a fairly straightforward system to deliver text messages to Akira customers. First, customers' cell phone numbers were loaded onto Opt It's text messaging system platform. Those numbers given directly to an Akira employee were manually entered into the [*4]  system, and the numbers customers texted directly to the opt-in number were automatically added to Opt It's platform. Akira could then manage its promotional text messaging system using Opt It's web interface, where an Akira employee could log in and draft a message to be sent to its text club customers. The Akira employee drafting the message then had the option to send the message immediately or set a future date and time for the message to be sent to all of the saved numbers. If Akira decided to change or cancel a message intended for future delivery, it could access the system and alter the message before it was sent or delete it altogether.

Akira gathered cell phone numbers for over 20,000 customers for its text club messages. From September 23, 2009 until May 27, 2011, Akira sent some sixty text messages advertising store promotions, parties, events, contests, sales, and giveaways to those 20,000 customers, including appellant Nicole Blow.

Blow was chosen as class representative after problems arose with her two predecessors. The original named plaintiff, Nicole Strickler, worked as an attorney for the law firm filing the complaint, Messer & Stilp, Ltd.2 Strickler's connection with [*5]  the firm emerged after the class had been certified, and Messer had filed a second amended complaint asserting claims against Akira and Opt It. Opt It then moved to disqualify the firm based on its failure to disclose that Strickler worked there. Strickler, through Messer, ultimately settled with Opt It and dismissed her claims against it. Meanwhile, Akira had moved to adopt Opt It's motion to disqualify Messer, which requested time to find a substitute class representative. It solicited two additional plaintiffs from the class, Nicole Blow and Jennifer Glasson. When it came to light that Glasson had never received Akira's texts, Glasson voluntarily dismissed her claims and Blow continued as the sole named plaintiff.

2   Now Messer, Stilp & Strickler, Ltd.

Blow's two count third-amended complaint alleges that Akira violated the TCPA's prohibition against using an automatic telephone dialing system to make calls without the express consent of the recipient. On behalf of the class, Blow claims over $1.8 billion in statutory damages, a figure that includes treble damages for alleged willful and knowing violations of the TCPA. See 47 U.S.C. § 227(b)(3). Both parties moved for summary judgment. Akira also moved, among other things, to decertify the [*6]  class and for sanctions against Blow under Federal Rule of Civil Procedure 11. After concluding that the software platform Opt It used to send text messages was not an autodialer as prohibited by the TCPA, the district court granted summary judgment to Akira. That conclusion rendered the remainder of Akira's pending motions moot, with the exception of the motion for sanctions, which the court denied. Blow appeals the district court's grant of summary judgment to Akira, and Akira cross-appeals the district court's denial of its motions for class decertification and for sanctions under Rule 11.

***

Finally, Akira challenges the district court's rejection of its motion for sanctions against Blow's counsel for alleged frivolous filings and instances of bad faith over the course of the litigation. We review the denial of sanctions under Rule 11 for an abuse of discretion, e.g., Cooney v. Casady, 735 F.3d 514, 518 (7th Cir. 2013). A district court abuses its discretion when "no reasonable person" would agree with the decision of the court. Id. Under Rule 11, sanctions are proper when a party or attorney signs a pleading or motion that is not well-grounded in fact and warranted by existing law. Fed. R. Civ. P. 11. Additionally, an attorney who vexatiously multiplies the proceedings may be responsible under 28 U.S.C. § 1927 for excess fees and costs arising from the improper conduct.

We see no abuse of discretion in the district court's conclusion that the litigational conduct of Blow's counsel did not rise to the level of impropriety that would warrant sanctions. Akira claims Blow's counsel knew she expressly consented to receive the texts and was therefore pressing a claim that was not supported by existing law. Akira also attacks counsel's failure to disclose that Strickler, the original named [*33]  plaintiff, was a member of the law firm representing her. This latter behavior certainly gives us pause, and we would hope Strickler and Messer would exercise better judgment in the future than using an attorney from their own firm as the named plaintiff in a class action. Despite our misgivings about the firm's judgment, we do not think the district court abused its discretion by concluding sanctions were not warranted. And although we ultimately reject Blow's claim that her consent did not extend to the various types of texts that Akira sent, we would not go so far as to conclude that her position was so baseless as to warrant sanctions.

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