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Dialing for dollars carries some risks…

While digging through Discover Financial Services’ (DFS) 10-K yesterday, we noticed an interesting disclosure about a class action lawsuit filed against the company last November in federal court in California’s Northern District. It seems that one of Discover’s card holders had a beef against the company because it allegedly

“…contacted him, and members of the class he seeks to represent, on their cellular telephones without their express consent in violation of the Telephone Consumer Protection Act (‘TCPA’).”

However effective they might be, we’ve never met anyone who actually liked getting telemarketing calls. And sales calls to your cell phone are particularly annoying, especially because most of us wind up paying for incoming calls one way or another.

In this case, the plaintiff who filed the suit is seeking statutory damages for alleged negligent and willful violations of the TCPA, attorneys’ fees, costs and injunctive relief, which could cost $500 for each violation and $1,500 if it’s a “willful violation.” Discover said it can’t currently predict how the case might turn out, but it “…will seek to vigorously defend against all claims asserted by the plaintiff.”

Never ones to pass up the opportunity to do a little cyber-snorkeling in the Code of Federal Regulations, we found the relevant rules here, in the Telephone Consumer Protection Act. There are indeed restrictions that limit the circumstances in which a party can make a sales or marketing call to a cell phone user, but there are also some exceptions that would possibly get the company off the hook (if the consumer had previously given his consent to be called or if the call had an emergency purpose).

It turns out that this isn’t the first time that Discover has litigated this type of class action lawsuit. Earlier in 2011, the company settled a similar case that had been filed in federal court in the Southern District of California, according to a 10-Q filed last July.

Neither filing goes into the details of the respective lawsuits, so there are a lot of possibilities here. It could be that the underlying facts of the case are similar, or they might be very different. The fact that the first case was settled might have inspired a second plaintiff/attorney duo to file their own lawsuit. And – as far as Discover is concerned, as a company with a $14.79 billion market cap – this could be the metaphorical equivalent of swatting mosquitoes at a picnic. As soon as it swats one down, another one comes circling.

We wondered, though: What other companies are dealing with class action lawsuits filed under the Telephone Consumer Protection Act? We found some other examples from the past few months’ filings, including:

Encore Capital Group, Inc. (ECPG), which got zapped with a couple of class actions filed in late 2010 in federal court in California’s Southern District. Encore Capital lost its bid to get the cases dismissed or stayed. Several months later, two more class action cases were filed in the Northern District of Illinois; but, according to the most recent 10-Q, Encore Capital won its motion to transfer the Illinois cases and consolidate them with the two already pending in California.

Career Education Corp. (CECO), a for-profit education company, has a couple of cases pending in federal court in the Northern District of Illinois, according to the company’s most recent 10-Q. Both of those cases alleged that the plaintiffs received unauthorized text message advertisements from the company, in violation of the TCPA. As of last fall, the parties were trying to negotiate settlements, but some issues remained “unresolved.”

Nelnet, Inc. (NNI), a student-loan servicing company, is defending a case filed against a subsidiary in federal court in New Jersey; that lawsuit, filed on behalf of a putative class, alleged that the company sent unauthorized advertising faxes, some of which were supposedly sent “willfully.” According to the most recent 10-Q, the complaint claims that the company “…sent putative class members more than 10,000 faxes that violated the TCPA, amounting to more than $5 million in statutory penalty damages and more than $15 million if trebled for willful violations.”

There are also several cases pending against smaller companies, but there aren’t so many that we would classify this as the cause of action du jour. Nevertheless, we’ll keep an eye on this topic and let you know if that changes.

Until then, if you get a call on your cell from a telemarketer, it may be comforting to know that you have options.

Image source: Set of touchscreen smartphones, via Shutterstock