Arizona, State of v. Michael D Lansky LLC

Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 1 of 35 1 WO — 2 — — 3 — — 4 — — 5 — 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA — 8 — 9 State of Arizona, et al., No. CV-23-00233-TUC-CKJ 10 Plaintiff, ORDER 11 v. 12 Michael D Lansky L.L.C., et al., 13 Defendants. — 14 — 15 On May 23, 2023, Plaintiffs, approximately 50 state attorney generals, filed this 16 action against Defendants Michael D. Lansky L.L.C., dba Avid Telecom (Avid Telecom), 17 M. Lansky, individually, and Stacey Reeves, individually, and as Vice President of 18 Operations and Sales of Avid Telecom. Plaintiffs allege Defendants violated the 19 Telemarketing and Consumer Fraud and Abuse Prevention Act (“Telemarketing Act”), 15 20 U.S.C. § 6101 et seq.; the Telemarketing Sales Rule (“TSR”), 16 C.F.R. § 310 et seq.; the 21 Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227 et seq., and certain state 22 laws that protect consumers against unfair and deceptive trade practices, including unfair, 23 deceptive, abusive, and illegal telemarketing practices. 24 Plaintiffs’ case focuses on the barrage of unwanted robocalls sent to millions of 25 American consumers that are harassing, annoying, threatening, and malicious. The 26 Complaint alleges the Defendants are in the business of providing Voice over Internet 27 Protocol (VoIP) services, facilitating, or initiating robocalls, and/or helping others make 28 robocalls. (Complaint (Doc. 1)). Avid Telecom is a VoIP business that makes and transmits Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 2 of 35 1 telephone calls for profit for retail customers that are the originating callers of robocall and 2 telemarketing calls and for wholesale customers that are other voice service providers that 3 route and transmit robocall and telemarketing calls. Id. ¶¶ 48-49 . VoIP providers use 4 robocalling technology that allows for the transmission of high call volumes in short 5 durations. Id. ¶ 60 . 6 “A robocaller can make multiple calls in a single second.” Id. Robocalls can be 7 prerecorded or artificially-voiced messages, or allow for computerized confirmation that a 8 call recipient has answered and then connects to a live operator. Id. “VoIP technology is 9 particularly attractive to scammers that place illegal robocalls because it allows them to 10 efficiently place millions or billions of calls as they troll for vulnerable consumers who 11 will fall victim to their financial or identity theft scams.” Id. ¶ 62 . In the world of 12 robocalling, calls move from provider to provider, and each stop is designated as a “hop” 13 moving “downstream” to the call recipient, with all downstream providers from the 14 “gateway” or “point of entry” on the U.S. voice communications network, except the last 15 provider, being collectively referred to as “intermediate providers.” Id. ¶ 53 . The last voice 16 service provider that delivers the call to its customer’s target call recipient is referred to as 17 the “terminating” provider. Id. ¶ 54 . Avid Telecom is classified or categorized in this arena 18 as either an originating provider or intermediate provider. Id. ¶ 55 . 19 Defendants responded to the Complaint with a Motion to Dismiss (Doc. 39) and a 20 Motion to Stay and Refer (Doc. 30) the case to the Federal Trade Commission (FTC) and 21 the Federal Communications Commission (FCC), the federal agencies charged with 22 oversight and regulation related to the federal laws at issue in the case. 23 A. Motion to Dismiss 24 1. Standard of Review 25 The Court disfavors and rarely grants a motion to dismiss for failure to state a claim. 26 Gilligan v. Jamco Dev. Corp., 108 F.3d 246 , 249 (9th Cir. 1997). Rule 12(b)(6) motion 27 tests the legal sufficiency of a claim. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). — 28 — -2Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 3 of 35 1 The Supreme Court announced the standard for review for a 12(b)(6) motion in 2 Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (U.S.,2005), Bell Atlantic Corp. v. 3 Twombly, 550 U.S. 544 (U.S., 2007), and Ashcroft v. Iqbal, 556 U.S. 662 (U.S., 2009). At 4 the pleading stage, a plaintiff must allege enough facts, if taken as true, to suggest that a 5 claim exists. This does not impose a probability requirement at the pleading state, it simply 6 requires enough facts to raise a reasonable expectation that discovery will reveal evidence 7 to support the claim. Twombly, 550 U.S. at 556 . To survive a 12(b)(6) motion, the Afactual 8 allegations [in the complaint] must be enough to raise a right to relief above the speculative 9 level, on the assumption that all the allegations in the complaint are true even if doubtful 10 in fact. Id. 11 In the Ninth Circuit, two conditions must be met when considering a motion to 12 dismiss for failure to state claim: (1) allegations in a complaint or counterclaim may not 13 simply recite the elements of a cause of action, but must contain sufficient allegations of 14 underlying facts to give fair notice and to enable the opposing party to defend itself 15 effectively, and (2) the factual allegations must plausibly suggest an entitlement to relief, 16 such that it is not unfair to require the opposing party to be subjected to the expense of 17 discovery and continued litigation. Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011)). 18 When considering whether the complaint is sufficient to state a claim upon which relief 19 may be granted, the Court takes material allegations as true and construes the claims in the 20 light most favorable to the nonmoving party. Lazy Y Ranch LTD. v. Behrens, 546 F.3d 580 , 21 588 (9th Cir. 2008). In reviewing a complaint under Rule 12(b)(6), all allegations of 22 material fact are taken as true and construed in the light most favorable to the non-moving 23 party. Newman v. Sathyavaglswaran, 287 F.3d 786, 788 (9th Cir. 2002); Vignolo v. Miller, — 24 — 120 F.3d 1075 , 1077 (9th Cir. 1999). The Court also assumes that general allegations 25 embrace the necessary, specific facts to support the claim. Smith v. Pacific Prop. and Dev. 26 Corp., 358 F.3d 1097, 1106 (9th Cir. 2004); Peloza v. Capistrano Unified Sch. Dist., 37 27 F.3d 517, 521 (9th Cir. 1994). Courts will not, however, assume the truth of legal 28 conclusions merely because they are cast in the form of factual allegations. Warren v. Fox -3Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 4 of 35 1 Family Worldwide Inc., 328 F.3d 1136 , 1139 (9th Cir. 2003); Western Mining Council v. 2 Watt, 643 F.2d 618, 624 (9th Cir. 1981). Furthermore, Courts will not assume that 3 defendants have violated additional laws, or that plaintiffs can prove exogenous facts, when 4 the appropriate allegations are absent. Associated General Contractors of California , Inc. 5 v. California State Council of Carpenters, 459 U.S. 519, 526 (1983). 6 In short, at the pleading stage the Plaintiff must allege enough facts, if taken as true, 7 to suggest that a claim exists. Dismissal is appropriate if the facts alleged do not state a 8 claim that is plausible on its face. Iqbal, 556 U.S. at 678 . Plausibility is not attained if the 9 facts are merely consistent with his claims. Twombly, 550 U.S. at 545, 557 . Where a 10 complaint pleads facts that are merely consistent with a defendant’s liability, it stops short 11 of the line between possibility and plausibility of entitlement to relief. Iqbal, 556 U.S. at 12 678 (quoting Twombly, 550 U.S. at 557 ). 13 Plaintiffs submit that “[i]f the Court grants the motion to dismiss, the Court should 14 ‘freely give’ leave to amend the complaint when there is no ‘undue delay, bad faith[,] 15 dilatory motive on the part of the movant[,] . . . undue prejudice to the opposing party by 16 virtue of . . . the amendment, [or] futility of the amendment[.]’” (Response to Motion to 17 Dismiss (Resp. MD) (Doc. 45) at 18 (quoting Foman v. Davis, 371 U.S. 178, 182 (1962); 18 Fed. R. Civ. P. 15(a)). “Generally, leave to amend the complaint is only denied when it is 19 clear that deficiencies in the complaint cannot be cured by an amendment.” Id. (citing 20 DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992)). 21 2. Personal Jurisdiction1 22 “Defendant Avid Telecom is incorporated in the State of Arizona. (Response 23 Motion to Dismiss (Resp. MD) (Doc. 45) at 14 (citing Complaint (Doc. 1) ¶ 10). 24 “Defendants do not present any evidence that contradicts this.” Id. Plaintiffs are correct 25 that general jurisdiction over Avid Telecom exists because Arizona is the state in which 26 the company is incorporated and where Avid Telecom maintains its principal place of — 27 — — 1 — A defendant may move, prior to trial, to dismiss the complaint for lack of personal 28 jurisdiction. Fed.R.Civ.P. 12(b)(2). Data Disc, Inc. v. Sys. Tech. Assocs., Inc., 557 F.2d 1280, 1285 (9th Cir. 1977). -4Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 5 of 35 1 business. (Resp. MD (Doc. 45) at 15 (citing Daimler AG v. Bauman, 571 U.S. 117 , 137 2 (2014): “The paradigm forum for the exercise of general jurisdiction [for a corporation] is 3 one in which the corporation is fairly regarded as at home.”). Defendants do not dispute 4 this. See also Reply (Doc 49) (no reply to Plaintiffs’ assertion of personal jurisdiction over 5 Avid Telecom based on its incorporation in Arizona). 6 Without question, the defense of lack of personal jurisdiction may be waived as a 7 result of a defendant's conduct during the litigation. Peterson v. Highland Music, Inc., 140 8 F.3d 1313, 1318 (9th Cir. 1998)). A party waives the defense of lack of personal 9 jurisdiction by omitting it from a motion under Federal Rule of Civil Procedure Rule 10 12(g)(2), and a party that makes a motion under Rule 12 must not make another motion 11 under Rule 12 raising a defense or objection that was available to the party but omitted 12 from its earlier motion. The defense is waived by failing to include it in a responsive 13 pleading. See Rule 12(h)(1). The Ninth Circuit construes the provisions of Rule 12(h) 14 strictly, observing that a "fundamental tenet" of the Federal Rules is that "certain defenses 15 . . . must be raised at the first available opportunity or, if they are not, they are forever 16 waived." Am. Ass’n. of Naturopathic Physicians v Hayhurst, 227 F.3d 1104, 1106 (9th Cir. 17 2007). Therefore, a general appearance or responsive pleading by a defendant that fails to 18 dispute personal jurisdiction can waive a defect in service or personal jurisdiction Benny v. 19 Pipes, 799 F.2d 489, 492 (9th Cir. 1986), amended by 807 F.2d 1514 (9th Cir. 1987). A 20 general appearance is “an overt act by which the party comes into court and submits to the 21 jurisdiction of the court,” and “an affirmative act involving knowledge of the suit and an 22 intention to appear.” Id. 23 Here, Defendant Reeves made an appearance in the case in June 2023, when after 24 waiving service, she had counsel file a notice of appearance in the case. “‘An appearance 25 ordinarily is an overt act by which the party comes into court and submits to the jurisdiction 26 of the court. This is an affirmative act involving knowledge of the suit and an intention to 27 appear.’” Id. (quoting 28 Fed. Proc. (L.Ed.) § 65.137 at 526 (1984) (further citations 28 omitted). -5Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 6 of 35 1 She was thereafter included as a Defendant in all Defendants’ filings. In July 2023, 2 Defendants filed a motion for an extension of time to file a responsive pleading in the case. 3 In September they sought a further extension of time to respond to the Complaint. Plaintiffs 4 objected and filed a Motion for Entry of Default for failure to file a responsive pleading. 5 Defendants filed responses to both requests. Both responses argued similarly that the 6 parties had been engaged in settlement discussions, including that Defendants had made 7 some document productions, and Defendants had been misled into believing that Plaintiffs 8 would agree to further extend the time to file a responsive pleading so that the matter might 9 be resolved by settlement. See (Order (Doc. 24) (granting extension of time and denying 10 request for entry of default). The Response objecting to Plaintiffs’ Application for Entry of 11 Default included a 28-page “Summary of Defenses to Complaint.” (Resp. App. For 12 Default, Ex. 4 (Doc. 23-4)). None of the documents filed with this Court, including the 13 Summary of Defenses, challenged the Court’s personal jurisdiction over Defendant 14 Reeves. 15 In Benny, the court considered three motions to extend time to file a responsive 16 pleading, noting that generally “a motion to extend time to respond gives no hint that the 17 answer will waive personal jurisdiction defects, and is probably best viewed as a holding 18 maneuver while counsel consider how to proceed.” Benny, 799 F.2d at 493 . The first two 19 motions to enlarge sought additional time because of counsel's involvement in other trials. 20 The court explained that it may have been prudent for defendants to include statements that 21 they were not waiving any affirmative defenses, but it would be harsh to label these pre22 answer omissions as a general appearance waiving the defense. The third motion, however, 23 specifically reserved the defense. Consequently, the court held there was no waiver and 24 proceeded to the merits of the case. Id. at 106-107. 25 Here, the Court considers Defendant Reeves’ pre-answer omissions in the motions 26 to extend time to respond to the Complaint and the responsive objection to the Plaintiffs’ 27 Application for Entry of Default. The motions filed in this case to extend time to file a 28 responsive pleading gave no hint that Defendant Reeves would waive personal jurisdiction -6Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 7 of 35 1 defects. Unlike the defendant in Benny, there was no reservation of right. Nevertheless, the 2 Court assumes the motions to extend time filed in this case, like most such motions, were 3 nothing more than holding maneuvers. The Court turns to the Response filed in objection 4 to Plaintiffs’ Application to Enter Default. The title of the pleading does not matter because 5 the essence of a Rule 12 waiver is to ensure certain defenses are raised at the first available 6 opportunity or, if they are not, they are forever waived. See Fed. R. Civ. P. 12(g), (h). 7 Hayhurst, 227 F.3d at 1106–07. In Hayhurst, the court recognized that when a party does 8 not respond to a complaint and default judgment is entered, a Rule 55 motion will very 9 frequently be the first document filed with the court. Id. at 1107. This Court finds no 10 rationale to distinguish between a Rule 55 motion to set aside a default or to set aside a 11 default judgment. Both are made pursuant to Rule 55(c). Likewise, if a party has appeared, 12 then that party, like Defendants in this case, are afforded notice and opportunity to be heard. 13 When this happens, like it did here, an objection to the application for default will likely 14 be the first opportunity, as it was here, for a defendant to challenge personal jurisdiction. 15 In the Response to the Application for Entry of Default, the Defendants expressly 16 argued the case lacked legal merit and “[t]he Complaint [was] riddled with false statements 17 of fact and facts that are plainly not applicable to Avid Telecom” and that “claims against 18 Ms. Reeves—who served as an independent contractor to Avid Telecom--in her individual 19 capacity, notwithstanding clear precedent in the 9th Circuit precluding such claims.” (Resp. 20 App. For Default (Doc. 23) at 8-9.) Defendants attached a “more complete summary of 21 certain of Defendants’ key defenses to the Complaint.” Id., Ex. 4 (Doc. 23-4)). They 22 argued: “The defenses that Defendants will assert are substantial and well founded and they 23 expect to be fully exonerated.” Id. at 9. Defendants asked the Court to deny the Application 24 for Entry of Default because they deserved “the opportunity to present these defenses and 25 Plaintiffs should not be allowed to use the default process to deny them that opportunity.” 26 Id. Finally, Defendants submitted that the failure to answer was inadvertent and not 27 intentional. — 28 — -7Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 8 of 35 — 1 — The Court finds that filing the Response to the Application for Entry of Default — 2 — was an overt act by which Defendant Reeves came before this Court and submitted to its — 3 — jurisdiction to resolve its objections. Benny, 799 F.2d at 492 . The Response, including the — 4 — “Summary of Defenses to Complaint,” evinced a “clear purpose to defend” unlike the — 5 — motions to extend time. Defendant Reeves should have raised the defense of personal — 6 — jurisdiction in the Response objecting to the Application for Entry of Default just as she — 7 — would have had to raise the defense in a motion to set aside the default or a default — 8 — judgment under Rule 55(c) to avoid waiving it. Cf., Thomas P. Gonzalez Corp. v. — 9 — Consejo Nacional de Produccion de Costa Rica, 614 F.2d 1247, 1255 (9th Cir. 1980) (“It — 10 — is well-established that a judgment entered without personal jurisdiction over the parties — 11 — is void.”). Defendant Reeves chose to not do either and waived her defense of lack of — 12 — personal jurisdiction. — 13 — Additionally, the Court finds that the challenge to personal jurisdiction fails on the — 14 — merits. The Complaint alleges specific personal jurisdiction over Defendant Reeves in — 15 — Arizona. — 16 — The Court applies the law of the state of Arizona because there is no applicable — 17 — federal statute governing personal jurisdiction. Schwarzenegger v. Fred Martin Motor Co., — 18 — 374 F.3d 797, 800 (9th Cir. 2004); see Fed. R. Civ. P. 4(k)(1)(A). “The Arizona long-arm — 19 — statute provides for personal jurisdiction co-extensive with the limits of federal due — 20 — process.” Doe v. Am. Nat'l Red Cross, 112 F.3d 1048 , 1050 (9th Cir. 1997). In this case, — 21 — therefore, “the jurisdictional analyses under state law and federal due process are the — 22 — same.” Schwarzenegger, 374 F.3d at 800–801. Due process requires a nonresident — 23 — defendant to have “certain minimum contacts” with the relevant forum so that the exercise — 24 — of personal jurisdiction “does not offend traditional notions of fair play and substantial — 25 — justice.” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (cleaned up). — 26 — Plaintiffs bear the burden of establishing jurisdiction. Mavrix Photo, Inc. v. Brand — 27 — Techs., Inc., 647 F.3d 1218, 1223 (9th Cir. 2011). Here, the Court decides the jurisdictional — 28 — question based only on written materials rather than on testimony at an evidentiary hearing, -8Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 9 of 35 1 therefore, “the plaintiff need only make a prima facie showing of jurisdictional facts.” 2 Schwarzenegger, 374 F.3d at 800 (citation and internal quotation marks omitted). 3 “Uncontroverted allegations in the complaint must be taken as true.” Id. 4 “‘The inquiry whether a forum state may assert specific jurisdiction over a 5 nonresident defendant focuses on the relationship among the defendant, the forum, and the 6 litigation.’” Herbal Brands, Inc. v. Photoplaza, Inc., 72 F.4th 1085, 1090 (9th Cir. 2023), 7 cert. denied, 144 S. Ct. 693 (2024) (quoting Walden v. Fiore, 571 U.S. 277 , 283–84 (2014) 8 (citations and internal quotation marks omitted). The Court applies a three-part test, as 9 follows: 10 (1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform 11 some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and 12 protections of its laws; 13 (2) the claim must be one which arises out of or relates to the defendant's forum-related activities; and — 14 — (3) the exercise of jurisdiction must comport with fair play and substantial 15 justice, i.e. it must be reasonable. — 16 — Id. (citing Schwarzenegger, 374 F.3d at 802 ). If the Plaintiff establishes the first two prongs 17 of the test, the burden shifts to the Defendant to present a compelling case that it would be 18 unreasonable to exercise personal jurisdiction of her. Id. (relying on Picot v. Weston, 780 19 F.3d 1206, 1211 (9th Cir. 2015) and Schwarzenegger, 374 F.3d at 802 ). 20 The first prong of the specific-jurisdiction inquiry encompasses two separate 21 concepts. Generally, “purposeful availment” provides the framework for analysis in a 22 contract case, and “purposeful direction” is the approach used for analyzing claims in tort. 23 “At bottom, both purposeful availment and purposeful direction ask whether defendants 24 have voluntarily derived some benefit from their interstate activities such that they ‘will 25 not be haled into a jurisdiction solely as a result of ‘random,’ ‘fortuitous,’ or ‘attenuated’ 26 contacts.’” Glob. Commodities Trading Grp., Inc. v. Beneficio de Arroz Choloma, S.A., — 27 — 972 F.3d 1101, 1107 (9th Cir. 2020) (quoting Burger King v. Rudzewicz, 471 U.S. 462 , 28 475 (1985)). In this case, the Court considers whether Defendant Reeves “purposefully -9Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 10 of 35 1 directed” her activities toward the forum by applying the “effects” test derived from Calder 2 v. Jones, 465 U.S. 783 (1984), which asks “whether the defendant: ‘(1) committed an 3 intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant 4 knows is likely to be suffered in the forum state.’” Herbal Brands Inc., 72 F.4th at 1091 5 (quoting Will Co. v. Lee, 47 F.4th 917, 922 (9th Cir. 2022) (quoting Schwarzenegger, 374 6 F.3d at 803)). 7 Plaintiff easily satisfies the first and third elements of the Calder effects test. VoIP 8 businesses, including Defendant Avid Telecom, intentionally provide calling services 9 using robocalling technology. The Complaint alleges Defendant Reeves was Vice10 President of Operations and Sales for Avid Telecom. (Complaint (Doc. 1) ¶ 381). In this 11 capacity, “Reeves participated in the control and management of Avid Telecom’s 12 customer-specific account settings and network-wide settings that affected how and where 13 calls were routed.” (Resp. MD (Doc. 45) at 8 (citing Complaint (Doc. 1) ¶¶ 190, 200)) “At 14 the customer account level, Reeves managed settings that determined call routing, call 15 signaling, and call volume for customers that initiated calls to telephone numbers with 16 Arizona area codes.” Id. ¶¶ 381-382. The Complaint is replete with specifically alleged 17 violations that were reported to Defendants, including Defendant Reeves, to which they 18 responded but allegedly did nothing to stop. Id. ¶¶ 100-135, 180-304, 323-330, 356-369, 19 386-389. 20 Plaintiffs proffer more detailed evidence outside the pleadings2 that specifically 21 relates to Defendant Reeves’ conduct as reported by Plaintiffs’ investigator that reflects 22 Defendant Reeves was notified on February 23, 2021, by Telco Connection that Avid 23 Telecom was sending IRS impersonation scam calls to Arizona area codes, and on 24 September 10, 2021, she was told Social Security Administration scam calls were being 25 sent to Arizona area codes. (Resp. MD, Ex. 1: Isaacs Decl. (Doc. 45-1) ¶ 16.) In response 26 2 The Court references this evidence because it summarizes the allegations in the Complaint more exactly to reflect Defendant Reeves’ conduct. Additionally, the Isaac Declaration 27 reflects Defendant Reeves’ challenge to personal jurisdiction would fail on the merits. At best, Plaintiffs would be directed to amend the Complaint to include allegations as reflected 28 in the declaration. Such amendment is unnecessary because Defendant Reeves has waived this defense. - 10 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 11 of 35 1 to an email to Inteliquent from Defendant Reeves, an Inteliquent employee responded with 2 a breakdown of where Defendants’ traffic was being routed to a terminating provider, 3 including two Arizona businesses. Id. ¶¶ 18-19. From March 20, 2021, until March 23, 4 2023, Industry Traceback Group notified Defendant Reeves of at least nine tracebacks for 5 calls to phone numbers with Arizona area codes. Id. ¶¶ 9-10. These calls included telephone 6 calls using a prerecorded or artificial voice. Id. 7 “Reeves managed the account settings for the Virtual Telecom/Mobi Telecom 8 account which made millions of deceptive “auto warranty” robocalls.” Id. ¶ 7. Including 9 “55,224,731 calls for Virtual Telecom/Mobi Telecom to telephone numbers with Arizona 10 area codes.” Id. ¶ 11. “At least 246 Arizona residents whose telephone numbers were called 11 in those 55,224,731 calls filed do-not-call complaints with the Federal Trade Commission 12 about unwanted warranty calls during that same time frame.” Id. ¶ 12. “Defendant Reeves 13 accessed and managed the John Spiller (“Spiller”) account and selected the downstream 14 provider where Spiller’s traffic would be routed,” id. ¶ 13, including “at least 360,332 15 telephone calls . . . with Arizona area codes, id. ¶ 14. “At least 3 Arizona residents whose 16 telephone numbers were called in those 360,332 calls filed do-not-call complaints with the 17 Federal Trade Commission about the receipt of auto warranty calls.” Id. ¶ 15. 18 The Court finds the Complaint alleges that Defendant Reeves knew that Avid 19 Telecom’s use of robocalling technology was causing harm in Arizona. For specific 20 jurisdiction to exist over Defendant Reeves, Plaintiffs’ claims must arise out of or be related 21 to her forum-related activities. In other words, it doesn’t matter that she “provided a 22 telephone number with an Arizona area code as her contact number,” (Resp. MD (Doc. 45) 23 at 8), or did not knowingly call or speak to anyone who was residing in Arizona, (MD 24 (Doc. 39) at 11). It makes no difference that she was an independent contractor. Here, the 25 dispositive second prong of the Calder test, whether Defendant Reeves expressly aimed 26 her activities at Arizona, requires a claim-tailored inquiry. Best explained in Briskin v. — 27 — — 28 — - 11 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 12 of 35 1 Shopify, Inc., 87 F.4th 404, 414 (9th Cir. 2023), this requires “but for” causation, i.e., a direct 2 nexus between what she did and the alleged injury in Arizona.3 3 The allegations in the Complaint support personal jurisdiction over Defendant 4 Reeves in Arizona because they allege that in her capacity as Vice President of Operations 5 and Sales, she worked directly with Avid Telecom customers to oversee the delivery of the 6 services at issue in this case that caused robocalls to be sent to Arizona, and she was notified 7 that these robocalls were violating the TSR and TCPA and, therefore knew that these 8 robocalls were causing harm in Arizona. It does not matter that the 246 robocalls 9 terminating in Arizona represents 0.00000445454525999 of the total 55 million robocalls 10 made via the account settings for Virtual Telecom/Mobi Telecom. (Reply MD (Doc. 49) 11 at 7. It is not true that “none” of the 246 calls were connected to Defendant Reeves’ 12 “personal activity.” It is enough that Defendant Reeves managed the account settings. As 13 Vice-President of Operations and Sales for Avid Telecom, her conduct related to the 14 control and management of Avid Telecom’s customer-specific account settings and 15 network-wide settings that caused robocalls for Virtual Telecom/Mobi Telecom to be 16 routed to and terminated in Arizona. This is enough. 17 The Court finds Herbal Brands, Inc., while not a perfect fit, applies in principle.4 18 3 The Court rejects Defendant Reeves suggestion that because she cannot be held personally liable for the conduct of the company, Avid Telecom, this Court lacks personal 19 jurisdiction over her. The Court understands that she may be asserting a challenge under the fiduciary shield doctrine where a person's mere association with a corporation that 20 causes injury in the forum state is not sufficient to permit that forum to assert jurisdiction over the person.” Davis v. Metro Prods., Inc., 885 F.2d 515 , 520 (9th Cir.1989). In the 21 Ninth Circuit, the fiduciary shield doctrine is not a question of constitutional significance and does not limit personal jurisdiction in states that have statutes extending jurisdiction to 22 the limits of due process. Id. at 522 (concluding that Arizona's “long-arm” statute extended jurisdiction to constitutional due process limits and was not limited by the fiduciary shield 23 doctrine). Consequently, “[e]ach defendant's contacts with the forum State must be assessed individually.” Id. at 521 (internal quotation marks and citation omitted). — 24 — — 4 — But see, Briskin v. Shopify, Inc., 87 F.4th 404 , 417–18 (9th Cir. 2023) (explaining need to 25 draw some lines to avoid subjecting web platforms to personal jurisdiction everywhere, every time, it offers a product for sale through an interactive website because this “would 26 be too broad to comport with due process; there must be something more); Martin v. Outdoor Network LLC, No. 2:23-CV-09807-AB-AJR, 2024 WL 661173 , at *3–4 (C.D. 27 Cal. Jan. 31, 2024 (limiting Herbal Brands Inc. to conduct centered around operating a website and distinguishing between operating “passive” websites that merely make 28 information available to visitors, which is insufficient to support personal jurisdiction, and “interactive” websites, where users exchange information with the host computer; finding - 12 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 13 of 35 1 The Ninth Circuit considered an interactive Amazon internet website, indiscriminately 2 available in all 50 states. Similarly, in this case Defendants offer robocalling services in all 3 50 states. In Herbal Brands, Inc., the court held “the express aiming inquiry does not 4 require a showing that the defendant targeted its advertising or operations at the forum,” if 5 defendant exercised some level of control over the ultimate distribution in Arizona of its 6 products, beyond simply placing products into the stream of commerce. Id. at 1094 . The 7 court applied pre-internet principles finding “‘distribution in the forum state of goods 8 originating elsewhere was a paradigmatic example of conduct purposefully directed at a 9 form state.’” Id. at 1093 (quoting Schwarzenegger, 374 F.3d at 803 )). In this case, the 10 Defendants placed robocalls into the stream of commerce. While not a physical product, 11 these robocalls were no less concretely directed into Arizona, similarly to the Herbal 12 products being delivered in Arizona. 13 In the Ninth Circuit, under Calder, purposeful availment may be satisfied if a 14 defendant intentionally directs activities into the forum intentionally committing a tort. 15 Brainerd v. Governors of the Univ. of Alberta, 873 F.2d 1257 , 1259–60 (9th Cir. 1989). A 16 telephone call initiated by an Arizona resident to defendant, a nonresident inquiring about 17 plaintiff’s past job performance resulted in allegedly negative comments causing plaintiff 18 injury in Arizona from tortious interference with contractual employment relationship in 19 Arizona. The court reasoned that defendant allegedly committed intentional torts. “His 20 communications were directed to Arizona, even though he did not initiate the contact. 21 Assuming the allegations in the complaint are true, [defendant] knew the injury and harm 22 stemming from his communications would occur in Arizona, where [plaintiff] planned to 23 live and work.” Id. at 1259 . The court found those contacts with the forum supported 24 latter supports personal jurisdiction only when something more can be established under Herbal Brands Inc., outside product sales cases and must be shown by conduct such as: 25 the degree of interactivity of the website (“sliding scale” of interactivity with more interaction, the more likely the operator expressly aimed at the jurisdiction); did operator 26 of website with national viewership and scope appeal to, and profit from, an audience in a particular state); did the website have a forum-specific focus or did defendant exhibit an 27 intent to cultivate an audience in the forum). Even if Herbal Brands, Inc. is not analogous, personal jurisdiction exists over Reeves because her alleged conduct included managing 28 accounts, including robocall settings, for Avid Telecom customers like Virtual Telecom/Mobi Telecon, intending to send these customer’s calls into Arizona. - 13 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 14 of 35 1 personal jurisdiction over the out-of-state defendant. The rationale for this conclusion was 2 found in Calder where the Supreme Court distinguished untargeted negligence, which will 3 not amount to purposeful availment, from intentional and allegedly tortious acts expressly 4 aimed at the forum. Id. (citing Calder, 465 U.S. at 789–90.) The court explained the logic 5 behind the effects test from Calder was that “where acts are performed for the very purpose 6 of having their consequences felt in the forum state, the forum will have personal 7 jurisdiction over the actor.” Id. at 1260 . See also: Baker v. Caribbean Cruise Line, Inc., — 8 — 2014 WL 880634 , at *2 (D. Ariz. Mar. 6, 2014) (finding personal jurisdiction based on 9 defendants calls to Arizona number where the calls formed the basis for TCPA claims.”); 10 Luna v. Shac, LLC, 2014 WL 3421514 , at *3 (N.D. Cal. July 14, 2014) (finding purposeful 11 direction based on intentionally sent text messages direct to cell phones with California 12 based area codes, which conduct allegedly violated the TCPA); Heidorn v. BDD Marketing 13 & Mgmt. Co., LLC, 2013 WL 6571629 , at *8 (N.D. Cal. Aug. 19, 2013) (finding personal 14 jurisdiction in TCPA case because calls were made to a California resident at a California 15 number). 16 Plaintiffs have sufficiently alleged Defendant Reeves exercised some level of 17 control over that ultimate delivery of Avid Telecom’s robocalling services to Arizona. 18 Accordingly, the Court finds that Defendant Reeves expressly aimed her activities at 19 Arizona because she knew the robocalls were likely to be received and cause harm in 20 Arizona. See also Bancroft & Masters, Inc. v. Augusta Nat. Inc., 223 F.3d 1082, 1087 (9th 21 Cir.2000) (deducing that the requirement, “expressly aimed” is satisfied when the 22 defendant is alleged to have engaged in wrongful conduct targeted at a plaintiff whom the 23 defendant knows to be a resident of the forum state), overruled in part on other grounds 24 by Yahoo! Inc. v. La Ligue Contre Le Racisme Et L'Antisemitisme, 433 F.3d 1199 (9th Cir. 25 2006). In the Ninth Circuit, it is enough if Defendant “knew or should have known” her 26 intentional acts were expressly aimed at Arizona. Washington Shoe Co. v. A–Z Sporting 27 Goods Inc., 704 F.3d 668, 678 (9th Cir.2012), abrogated on other grounds by Axiom 28 Foods, Inc. v. Acerchem International, Inc., 874 F.3d 1064 (9th Cir. 2017). - 14 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 15 of 35 1 This Court has personal jurisdiction over Defendant Reeves because she fails to 2 show it is unreasonable. The logic of Herbal Brands, Inc. applies again: “When an online 3 sale occurs as part of a defendant's regular course of business, it ‘arises from the efforts of 4 the [seller] to serve directly or indirectly[ ] the market for its product ...,’ and the defendant 5 ‘should reasonably anticipate being haled into court” where the product is sold.’” Herbal 6 Brands, Inc., 72 F.4th at 1094 (quoting World-Wide Volkswagen Corp. v. Woodson, 444 7 U.S. 286 , 297 (1980)), see also Brainerd, 873 F.2d at 1260 (applying Burger King, 471 8 U.S. at 477, presumption that personal jurisdiction is reasonable when defendant 9 purposefully directs his activities into the forum). 10 There is no evidence to suggest that the alleged robocalls to Arizona residents 11 occurred outside of the regular course of business, specifically Avid Telecom’s general 12 robocalling business. The robocalls also occurred within the regular course of Defendant 13 Reeves’ business responsibilities for managing customer accounts, including robocall 14 settings that determined call routing, call signaling, and call volume for customers that 15 initiated calls to telephone numbers with Arizona area codes. The Court finds that 16 Defendant Reeves should have reasonably anticipated being haled into court where she 17 was directing the robocalls to go, including Arizona. 18 3. Individual Liability: Defendants M. Lansky and S. Reeves 19 The Defendants argue that Plaintiffs cannot hold Defendant Reeves liable for acts 20 of Avid Telecom because there is no evidence that she held any decision-making authority 21 or control or that her role was anything other than that of an independent contractor. 22 According to Defendants, the law in the Ninth Circuit precludes vicarious liability under 23 the TCPA where the alleged conduct arises out of an independent contractor relationship. 24 (Motion to Dismiss (MD) (Doc. 39) at 11-12 (citing Jones v. Royal Admin. Servs. Inc., 887 25 F.3d 443 (9th Cir. 2017) (further citations omitted). 26 Simply establishing that Avid Telecom paid Defendant Reeves, and she paid her 27 taxes, as an independent contractor is not determinative. Whether an employee is an 28 independent contractor is a legal conclusion based on a factual inquiry aimed at - 15 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 16 of 35 1 determining whether the hiring party has the right to control the manner and means by 2 which the product is accomplished. (Resp. MD (Doc. 45) at 13) (citations omitted). The 3 Court must consider relevant factors, as follows: “‘[1] the skill required; [2] the source of 4 the instrumentalities and tools; [3] the location of the work; [4] the duration of the 5 relationship between the parties; [5] whether the hiring party has the right to assign 6 additional projects to the hired party; [6] the extent of the hired party’s discretion over 7 when and how long to work; [7] the method of payment; [8] the hired party’s role in hiring 8 and paying assistants; [9] whether the work is part of the regular business of the hiring 9 party; [10] whether the hiring party is in business; [11] the provision of employee benefits; 10 and [12] the tax treatment of the hired party.’” Id. (quoting Murray v. Principal Fin. Grp., 11 Inc., 613 F.3d 943 , 945–46 (9th Cir. 2010) (quoting Nationwide Mutual Insurance Co. v. 12 Darden, 503 U.S. 318, 323 (1992)). Defendants fail to provide any analysis of these factors 13 showing that Defendant Reeves should be categorized as an independent contractor. 14 Until Defendant Reeves’ status as an independent contractor is established, the 15 Court cannot determine whether the law in the Ninth Circuit precludes the imposition of 16 vicarious liability under the TCPA, if the alleged conduct arises out of such an independent 17 contractor relationship. Plaintiffs are correct that Defendants ask the Court to consider facts 18 outside of those alleged in the Complaint. (Resp. MD (Doc. 45) at 17-19 (citing Hal Roach 19 Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542 , 1555 n. 19 (9th Cir. 1990)). Questions 20 of fact relevant to determining vicarious liability require discovery and preclude granting 21 the motion to dismiss on this issue. This argument fails as a matter of law based on the 22 facts now before the Court. 23 Defendants argue that Plaintiffs fail to allege facts to support piercing the corporate 24 veil and holding Defendant Lansky personally liable for acts of Avid Telecom. (MD (Doc. 25 39) at 13-14.) Defendants challenge the allegations in the Complaint that Lansky used the 26 Michael D. Lansky L.L.C. corporate credit card, bank account, and/or PayPal account for 27 his personal expenses. Defendants submit evidence that Lansky took ultimate — 28 — - 16 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 17 of 35 1 responsibility for the payment of referenced charges and that merely alleging credit card 2 use personally by Lansky is not enough. Id. at 14. 3 Piercing the corporate veil is a means to reach individual ownership assets when the 4 line between the corporation and the individual owners is blurred. Standage v. Standage, — 5 — 711 P.2d 612, 614 (Ariz. App. 1985). Federal courts apply the law of the forum state to 6 determine whether to pierce the corporate veil. SEC v. Hickey, 322 F.3d 1123 , 1128 (9th 7 Cir. 2003). Generally, a corporation will be treated as a legal entity until there is sufficient 8 reason to disregard the corporate form as a corporate fiction. This occurs if the corporation 9 is the alter ego or business conduit of a person, and when observing the corporate form 10 would work an injustice. Dietel v. Day, 492 P.2d 455, 457 (Ariz. App. 1972). There must 11 be a unity of interest and ownership so that the separate personalities of the corporation 12 and owners cease to exist. Id. (citing Employer's Liability Assurance Corporation v. Lunt, — 13 — 313 P.2d 393 (Ariz. 1957)). This theory of liable has only been alleged against Defendant 14 Lansky. 15 “The concept of a corporation as a separate entity is a legal fact, not a fiction.” 16 Deutsche Credit Corp. v. Case Power & Equip. Co., 876 P.2d1190, 1195 (Ariz. App. 17 1994). Corporate status will not be lightly disregarded.” Chapman v. Field, 602 P.2d 481 , 18 483 (1979) (en banc). 19 Factors indicating a corporation and its owner have an “alter ego” relationship 20 include the “commingling of personal and corporate funds” and the failure to maintain 21 corporate records or observe other “formalities of separate corporate existence, such as: 22 having common officers or directors; payment of salaries and other expenses of a 23 subsidiary by a parent (or of a corporation by shareholders); failure to maintain formalities 24 of separate corporate existence; similarity of corporate logos; plaintiff's lack of knowledge 25 of separate corporate existence; owners making interest-free loans to corporation; 26 maintaining of corporate financial records; commingling of personal and corporate funds; 27 diversion of corporate property for shareholders' personal use; observance of formalities of 28 corporate meetings; intermixing of shareholders' actions with those of corporation; and - 17 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 18 of 35 1 failing to file corporate income tax returns and ACC annual reports. Deutsche Credit, 876 2 P.2d at 1195-1196) (Ariz. App. 1994) (citations omitted). 3 Factors indicating “injustice or fraud” include presenting evidence that the 4 corporation was “formed for the purpose of perpetrating a fraud or other illegal act,” Butler 5 v. Am. Asphalt & Contracting Co., 540 P.2d 757, 761 (Ariz. App. 1975), that the 6 corporation was undercapitalized when formed, Norris Chem. Co. v. Ingram, 679 P.2d 567 , 7 570 (Ariz. App. 1984), or that “observance of the corporate form would confuse the 8 opposing parties and frustrate their efforts to protect their rights,” Keg Rests. Ariz., Inc. v. 9 Jones, 375 P.3d 1173, 1184 (Ariz. App. 2016), such as operating under confusingly similar 10 names, leading customers, vendors, and other third parties to “reasonably assume” that the 11 two are “only one company, Gatecliff v. Great Republic Life Ins. Co., 821 P.2d 725 , 729 12 (Ariz. (1991) (en banc). 13 On a motion to dismiss, the Court’s concern is with the pleadings, not the 14 evidentiary proof of the claims. Given the disfavor for piercing the corporate veil, both the 15 “unity of form” prong and the fraud/illegal prong of the claim must be plead with 16 specificity. Conclusory allegations of “alter ego” status are insufficient to state a claim, and 17 a plaintiff must allege specifically both of the elements of alter ego liability, as well as facts 18 supporting each. Neilson v. Union Bank of California, N.A., 290 F. Supp. 2d 1101 , 1116 19 (C.D. Cal. 2003); Cullen v. Auto-Owners Ins. Co., 189 P.3d 344, 346 (Ariz. 2008) 20 (conclusory statements are insufficient; claims must be supported with well-pled facts). 21 See also Ariz. R. Civ. P. 9(b) (requiring fraud to be pled with particularity); see also Green 22 v. Lisa Frank, Inc., 211 P.3d 16, 33 (Ariz. App. 2009). “Magic language” is not required, 23 but bare allegations of fraud are insufficient. Hall v. Romero, 685 P.2d 757, 761 (Ariz. 24 App. 1984 ). 25 Here, Plaintiffs ask the Court to pierce the corporate veil between Defendants 26 Michael D. Lansky, L.L.C. and Defendant Lansky, individually, (Complaint (Doc. 1) ¶ 27 406), because “Michael D. Lansky, L.L.C. and Lansky demonstrated a complete lack of 28 respect to the separate identities of each entity and comingled corporate and personal - 18 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 19 of 35 1 assets,” id. ¶ 407. “Lansky controlled Michael D. Lansky, L.L.C.’s corporate bank 2 account(s), corporate credit card(s), corporate check book(s), and corporate PayPal 3 account(s),” id. ¶ 408, and comingled money for Lansky personally, id. As examples of 4 Lansky’s use of corporate funds for personal expenses, which allegedly diverted corporate 5 assets to fund substantial personal expenses so as to limit the corporation’s abilities to 6 satisfy remedial obligations, Plaintiffs offered purchases as follows: Ancestry.com DNA 7 L.L.C.; Bandcamp for the full digital discography (9 releases) by Clann An Drumma; 8 Payment for the SMHS reunion for Michael Lansky and another person; Payment for a 9 “Michael Lansky for Bicycle replacement;” and Payment for “Bachelor Party lodging.” Id. 10 ¶¶ 410-411. 11 Plaintiffs summarily allege that Defendant Lansky operated through Michael D. 12 Lansky, L.L.C. and their conduct was one and the same, id. ¶ 413; 414, Defendant Lansky’s 13 conduct through Michael D. Lansky, L.L.C., caused harm to consumers, id. ¶ 414. 14 Plaintiffs ask the Court to pierce the corporate veil between Michael D. Lansky, L.L.C. and 15 Lansky as a sanction against fraud, to promote justice, and dissuade the evasion of legal 16 obligations. Id. ¶ 415. 17 Defendants do not improperly introduce evidence outside the Complaint by 18 rebutting the examples from it. The Court agrees that the amounts for the alleged improper 19 personal purchases Defendant Lansky made by Defendant Michael D. Lansky, L.L.C. are 20 few and for relatively small amounts. They do not necessarily support the conclusory 21 allegations that Defendant Lansky diverted corporate assets to fund substantial personal 22 expenses that limited the corporation’s abilities to satisfy remedial obligations. There is no 23 evidence these amounts were not reimbursed, and alone they do not suffice to pierce the 24 corporate veil. Plaintiffs have failed to allege specific facts to support the assertion that 25 there is a unity of interest or ownership between Lansky and Michael D. Lansky L.L.C. or 26 to show that Michael D. Lansky L.L.C. was created and/or used thereafter with an intent 27 to defraud or commit illegal activities. Plaintiffs may amend the Complaint to state this 28 claim. See also, Fed. R. Civ. P.15(a)(2) and (b). - 19 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 20 of 35 1 As Plaintiffs point out, even though “corporate officers and directors are generally 2 shielded from liability for acts done in good faith on behalf of the corporation, their status 3 does not shield them from personal liability to those harmed as a result of intentionally 4 harmful or fraudulent conduct.” Albers v. Edelson Tech. Partners L.P., 31 P.3d 821 , 826 5 (Ariz. App. 2001) (citing 19 C.J.S. Corporations § 537 (1990) (“A corporate officer ... is 6 personally liable for his wrongful deeds, even though he acts in his capacity as a corporate 7 officer.”); id. § 546(a) (“Directors or officers of a corporation are liable for their fraudulent 8 acts to persons injured thereby.”); 18B Am.Jur.2d Corporations § 1882 (1985) (“[I]t is 9 clearly established that a director or officer of a corporation is individually liable for 10 fraudulent acts or false representations of his own or in which he participates, even though 11 his action in such respect may be in furtherance of the corporate business.”); accord 12 Bischofshausen, Vasbinder, & Luckie v. D.W. Jaquays Mining & Equip. Contractors Co., — 13 — 700 P.2d 902 , 908–09 (Ariz. App.1985)). “‘A contrary rule would enable a director or 14 officer of a corporation to perpetrate flagrant injuries and escape liability....’” Id. (quoting 15 18B Am.Jur.2d Corporations § 1877)). The corporate shield cannot be used to protect those 16 who employ corporate power to serve their own ends. Id., see also Maryland v. Universal 17 Elections, 787 F. Supp. 2d 408, 415 (D. Md. 2011) (finding liability under the TCPA if 18 they “had direct, personal participation in or personally authorized the conduct found to 19 have violated the statute”) (quoting Texas v. Am. Blastfax, 164 F.Supp.2d 892 , 898 20 (W.D.Tex. 2001); F.T.C. v. Garvey, 383 F.3d 891 , 900 (9th Cir. 2004) (finding individuals 21 subject to injunctive relief under FTCA if they participated directly in the acts in question 22 or had authority to control them). The TSR claims are enforceable under the FTCA, 23 pursuant to 15 U.S.C. § 6102 (c)(1). Fed. Trade Comm'n v. Simple Health Plans L.L.C., 58 24 F.4th 1322 , 1329 (11th Cir. 2023). 25 Plaintiffs have alleged that Defendants Lansky and Reeves, as officers of Avid 26 Telecom, participated in and directed or supervised illegal trade practices. (Complaint 27 (Doc. 1) ¶ 405.) The Complaint states claims against Defendants Lansky and Reeves, 28 individually. It remains to be seen, upon development of the record in respect to the parties’ - 20 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 21 of 35 1 relationships, the individual roles and responsibilities of each of them, and their actual 2 undertakings in respect to the alleged violations whether these Defendants may be held 3 individually liable. 4 Defendants submit a Supplement to the Motion to Dismiss wherein they argue: “The 5 Third Circuit Court of Appeals has raised ‘doubt’ as to whether ‘common-law-personal 6 jurisdiction liability is available against corporate officers under the TCPA.” (Supp. MD 7 (Doc. 62) at 3 (citing Perrong v. Chase Data Corp., 2024 WL 329933 *4 (Penn. January 8 26, 2024) (quoting City Select Auto Sales Inc. v. David Randall Assocs., Inc., 885 F.3d 154 , 9 160 (3d Cir. 2018)). First, neither Perrong nor City Select are binding precedential in this 10 Court. Second, the Third Circuit law referenced in Perrong is not new law issued 11 subsequent to briefing the Motion to Dismiss; City Select was issued in 2018. Perrong is 12 merely a recent application of it. 13 It is appropriate to file a notice of supplemental authority to inform the Court of a 14 new judicial opinion that has been issued but this is not an opportunity to argue outside the 15 pleadings. Doe v. Blue Cross Blue Shield of Illinois, 492 F. Supp. 3d 970 , 980 (D. Ariz. 16 2020) (citations omitted), see also Hagens Berman Sobol Shapiro LLP v. Rubinstein, 2009 17 WL 3459741 , at *1, 2009 U.S. Dist. LEXIS 104619 , at *3 (W.D. Wash. Oct. 22, 2009) 18 (notice of supplemental authority improper “because it contained argument regarding the 19 case” already submitted and ripe for the court's review). If Defendants wanted to merely 20 inform the Court of the Perrong decision, this could have been accomplished within a 21 sentence so stating the purpose of the filing. Instead, Defendants included two plus pages 22 of additional argument for why the Court should dismiss the individual claims against the 23 Defendants Reeves and Lansky. Such additional argument is inappropriate, and the court 24 will not consider it. The Court grants the Plaintiffs’ Motion to Strike the Supplement. 25 4. Meritless and/or Outside the Pleadings. 26 a. Argument: Common Carrier Exception 27 Defendants challenge claims against Avid Telecom under the TSR by asserting 28 Avid Telecom is a common carrier, not an information-service provider. “A - 21 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 22 of 35 1 telecommunications carrier is ‘any provider of telecommunications services.’” (Resp. MD 2 (Doc 45) at 21) (quoting 47 U.S.C. § 153 (51)). “This is when the provider transmits 3 ‘information of the user’s choosing, without change in the form or content of the 4 information as sent and received.’” Id. (quoting 47 U.S.C. § 153 (50)). “Information-service 5 providers offer the ‘capability for generating, acquiring, storing, transforming, processing, 6 retrieving, utilizing, or making available information via telecommunications . . . but does 7 not include any use of any such capability for the management, control, or operation of a 8 telecommunications system.’” Id. (quoting 47 U.S.C. § 153 (24)). 9 The TCPA, and by extension the TSR claim for relief thereunder, does not apply 10 to common carriers. Couser v. Pre-paid Legal Services, Inc., 994 F.Supp.2d 1100 , 1104 11 (S.D.Cal.2014) (citing S.Rep. No. 102–178 (1991) (explaining Congress intended TCPA 12 to “apply to the persons initiating the telephone call or sending the message and ... not to 13 the common carrier ... that transmits the call or messages and that is not the originator or 14 controller of the content of the call or message.”) The determination of whether a VoIP 15 provider falls wholly within the definition of a common carrier “is a fact-dependent 16 inquiry” that has been “long-contested” in the industry and “raging for years.” FTC v. 17 Educare Centre Services, Inc., 433 F. Supp. 3d 1008 , 1017-18 (W.D. Tex. 2020) 18 (collecting cases, quotation omitted). 19 Plaintiffs correctly point out that this factual inquiry should not be determined at the 20 pleading stage. (Resp. MD (Doc. 45) at 19 (citing Linlor v. Five9, Inc., No. 17CV21821 MMA (BLM), 2017 WL 2972447 , at *4 (S.D. Cal. July 12, 2017) (holding: “The Court . . 22 . declines to find as a matter of law, at the pleadings stage, that Defendant is a common 23 carrier exempt from liability under the TCPA.”); Couser, 994 F. Supp. 2d at 1104–05 24 (explaining “with only pleadings to go on and no discovery as to the precise relationship 25 between CallFire and Legal Shield, it is simply too early in this litigation for the court to 26 affirmatively conclude that CallFire is the middleman it claims[]”); Kauffman v. CallFire, 27 Inc., No. 3:14-CV-1333-H-DHB, 2015 WL 11237468 , at *1 (S.D. Cal. July 22, 2015) — 28 — - 22 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 23 of 35 1 (stating that “whether CallFire is a common carrier is a factual issue better suited for 2 resolution at summary judgment[]”). 3 The question of liability under the common carrier exception turns on 1) whether 4 the carrier “holds himself out to serve indifferently all potential users; and 2) whether the 5 carrier allows ‘customers to transmit intelligence of their own design and choosing.’” (MD 6 (Doc. 39) at 17 (quoting United States Telecom Ass’n v. FCC, 295 F.3d 1326, 1329 (D.C. 7 Cir. 2002) and (citing Payton v. Kale Realty, LLC., 164 F. Supp.3d 1050, 1056 (N.D. Ill., 8 2016)). 9 The answers to these questions turn on facts that are undeveloped at this time and 10 need to be developed through discovery to determine the precise relationship between Avid 11 Telecom and its customers, and the allocation of responsibility between them. Because 12 there has been no discovery, Defendants submit without any evidentiary support that “Avid 13 Telecom is engaged in only one line of business: the provision of telecommunications 14 services to wholesale customers (other common carriers) and to end-user customers.” (MD 15 (Doc. 39) at 17.) “Like all common carriers, Avid Telecom’s telecommunications services 16 are “available to all potential users,” and allow customers to transmit intelligence of their 17 own design and choosing. Avid Telecom does not participate in the content of any of the 18 voice services that it provides.” Id. at 17-18. See also (Reply to Motion to Dismiss (Reply 19 MD) (Doc. 49) at 11 (relying on Lansky Decl. Ex. II (Doc. 49-2) ¶ 7) (asserting “In truth, 20 Avid Telecom does not have the technological ability to undertake a protocol conversion, 21 nor has it ever done so.”) 22 Presentation by Defendants of supporting evidence on this issue in the Motion to 23 Dismiss is one-sided and without the benefit of adversarial discovery. The Court will not 24 consider evidence of facts outside of those alleged in the Complaint. Hal Roach Studios, 25 Inc., 896 F.2d at 1555 n. 19.5 — 26 — 27 5 The Court will not strike, pursuant to LRCiv. 7.2(m)(1), this portion of the Motion to Dismiss. Plaintiffs’ objection in the Response sufficed, LRCiv. 7.2(m)(2). The Court did 28 not consider evidence outside the record offered by Defendants. The Court did not consider it to support the assertion that the common carrier exception applies to Avid Telecom. - 23 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 24 of 35 1 b. Argument: No Substantial Assistance Provided to Others that Were 2 Violating TSR and TCPA 3 Summary judgment is the appropriate procedure for Defendants’ arguments of due 4 diligence to dispute the charge of substantial assistance and conscious avoidance with 5 proffers of evidence outside the pleadings such as: Avid Telecom’s “Know Your 6 Customer” (KYC) procedures, FCC 499 registrations, and utilization of STIR/SHAKEN 7 caller ID authentication. 8 For the TSR violation, Plaintiffs pled that Defendants provided “substantial 9 assistance or support to sellers and telemarketers that were violating the TSR in 10 contravention of 16 C.F.R. § 310.3 (b)[,]” and Defendants knew or consciously avoided 11 knowing about specific violations of the TSR. (Complaint (Doc. 1) ¶ 431.) This is enough. 12 Plaintiffs have properly pled that Defendants assisted and facilitated actors that violated 13 the TSR, which is itself a violation. 16 C.F.R. § 310.3 (b). There is no merit to Defendants’ 14 argument that Count I should be dismissed because they are not “sellers” or “telemarketers” 15 under the TSR. (MD (Doc. 39) at 19.) Plaintiffs do not allege this in the Complaint, and it 16 is not a requirement for the claimed violation of 16 C.F.R. § 310.3 (b). The Court disregards 17 this challenge. 18 Likewise, there is no merit to the argument that Plaintiffs failed to allege facts with 19 sufficient specificity to support the TSR claim that Avid Telecom provided “substantial 20 assistance” to a telemarketer with “knowledge or conscious avoidance of knowing” that 21 the telemarketer was violating the TSR. (MD (Doc. 39) at 20.) Defendants challenge as 22 merely conclusory the factual allegations that they provided the following services: “(i) 23 retail or wholesale voice termination; (ii) dialing software; (iii) assistance with DID 24 rotation; (iv) DID assignment; (v) provision of leads for customers to call; and (vi) 25 provision of ‘advice.’” Id. (citing Complaint (Doc. 1) ¶ 431.) First, these are not conclusory 26 assertions. These are alleged facts which, pursuant to a Rule 12(b) motion, are considered 27 by the Court to be true for the purpose of assessing the sufficiency of the pleading. — 28 — - 24 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 25 of 35 1 Defendants also complain that the “Plaintiffs do not identify a single customer who 2 allegedly received any of these services; offer any details regarding the functionality of the 3 supposed dialing software or the location or functionality of the supposed predictive dialer; 4 or produce a copy of a “leads” list.” Id. Plaintiffs do, however, detail Defendants’ 5 interactions with two customers Spiller and Sumco. (Complaint (Doc. 1) ¶¶ 304, 371-403.) 6 Plaintiffs allege Spiller transmitted robocalls, which were made without consent to 7 numbers on the national Do Not Call Registry, in violation of the TSR, id. ¶¶ 309–14, and 8 Defendants sold Spiller thousands of DIDs, id. ¶¶ 316-18 ; switched Spiller’s account so 9 that he could “run [his] traffic if the FCC shuts off [his] business,” id. ¶¶ 337-41 ; hid the 10 rightful source of Spiller’s call traffic from the Industry Traceback Group, id. ¶ 341 , and 11 knew what type of traffic Spiller was sending them, id. ¶ 336 . Finally, Plaintiffs allege that 12 Spiller testified in a deposition that Defendant Lansky personally helped Spiller with the 13 content of his messages. Id. at ¶ 370 . 14 Plaintiffs similarly allege facts against Defendants to support the claim of 15 substantial assistance related to their client Sumco. Id. ¶¶ 371-403 . 16 As noted in detail in the section of this Order considering personal jurisdiction, Avid 17 Telecom and Defendant Reeves received notice that Avid Telecom customers were 18 violating the TSR and/or TCPA. Plaintiffs allege multiple instances when Defendants were 19 put on notice that a customer was violating the TSR and/or TCPA and did nothing to stop 20 these customers from continuing to use Avid Telecom services in violation of the TSR 21 and/or TCPA. Id. ¶¶ 100-135, 180-304, 323-330, 356-369, 386-389 . 22 While Defendants assert that Plaintiffs’ factual allegations should have specified 23 how and when Avid Telecom provided “substantial assistance,” the Defendants provide no 24 law suggesting there is a heightened pleading standard for this element of the claim. “‘The 25 threshold for what constitutes ‘substantial assistance’ is low: ‘there must be a connection 26 between the assistance provided and the resulting violations of the core provisions of the 27 TSR.’” (Resp. MD (Doc. 45) at 26 (quoting F.T.C. v. Consumer Health Benefits Ass'n, No. 28 10 CIV. 3551 ILG RLM, 2012 WL 1890242 , at *6 (E.D.N.Y. May 23, 2012) (quoting - 25 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 26 of 35 1 United States v. Dish Network, L.L.C., 667 F.Supp.2d 952, 961 (C.D. Ill. 2009) (substantial 2 assistance found where defendant paid dealers to engage in telemarketing that violated TSR 3 and allegedly knew or consciously avoided knowledge of violations)). 4 The Plaintiffs’ Complaint satisfies the standards for considering a motion to dismiss 5 under Rule 12(b)(6) set out in Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) to 6 ensure the Complaint provides Defendants with fair notice of a legally cognizable claim 7 and the grounds on which that claim rests. The allegations challenged by Defendants are 8 not threadbare recitals of elements of the claims supported by merely conclusory 9 statements. The Court finds that factual allegations in the Complaint “plausibly give rise 10 to an entitlement to relief” for violations of the TSR and TCPA. 11 c. Argument: Avid Telecom Never Initiated Calls Covered by TCPA 12 The Defendants challenge the sufficiency of the TCPA claims that Avid Telecom 13 initiates telephone calls or causes any telephone calls to be initiated; according to 14 Defendants, this allegation is “demonstrably false.” (MD (Doc. 39) at 26.) Again, the 15 Motion to Dismiss is not an appropriate procedure for challenging the demonstrable merit 16 of a claim. As noted above, the Plaintiffs allege facts sufficient to support the claim that 17 Defendants provided substantial assistance or support to customers, such as telemarketers, 18 to place robocalls and that Defendants knew or consciously avoided knowing such 19 customers were violating the TSR. The facts supporting this latter allegation are likewise 20 sufficient to support the Count II claim that Defendants failed to exercise due diligence to 21 prevent such violations as required under the TCPA. 22 There is no merit to the Defendants’ argument that as a matter of law the TCPA 23 claims fail because Avid Telecom cannot be found to have ever initiated any calls covered 24 by the TCPA. Defendants provide no contrary law to that relied on by the Plaintiffs that 25 “while the TCPA does not define what it means to make or initiate telephone calls, ‘one 26 can violate the TCPA either by taking the steps necessary to physically place a telephone 27 call, or by being so involved in the placing of a specific telephone call as to be deemed to 28 have initiated it.’” (Resp. MD (Doc. 45) at 29) (quoting Mey v. All Access Telecom, Inc., - 26 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 27 of 35 1 No. 5:19-CV-00237-JPB, 2021 WL 8892199 , at *4 (Va. Apr. 23, 2021) (citing Rules & 2 Regs. Implementing the Tel. Consumer Prot. Act of 1991, 30 FCC Red. 7961, 7890 (2015) 3 (the “2015 FCC Order”)). “The 2015 FCC Order instructs courts to look at ‘the totality of 4 the facts and circumstances’ to determine whether an entity is sufficiently involved in 5 placing a call to be deemed to have made or initiated it.” Id. (citing 2015 FCC Order at ¶ 6 30). The FCC Order identifies several relevant factors, such as: “‘the extent to which a 7 person willfully enables fraudulent spoofing of telephone numbers’ and knowingly 8 allowing the use of a platform for unlawful purposes.” Id., see also Off. of the Att'y Gen. v. 9 Smartbiz Telecom LLC, No. 1:22-CV-23945-JEM, 2023 WL 5491835 at *4 (Fla. Aug. 23, 10 2023); Mey, 2021 WL 8892199 at *5; Hurley v. Messer, No. CV 3:16-9949, 2018 WL 11 4854082, at *4 (Va. Oct. 4, 2018) (finding that alleging the ability to stop illegal use of 12 VoIP services, and the failure to take action to do so, states a claim under the TCPA). 13 There is no basis as a matter of law to grant the Motion to Dismiss as to Counts II 14 and III. “Plaintiffs have sufficiently alleged both that Defendants had actual notice of the 15 illegal use of Avid Telecom’s network and failed to take steps to prevent such 16 transmissions and that Defendants were sufficiently involved in the illegal calls to be 17 deemed to have initiated them. Either of these is sufficient to support Plaintiff’s TCPA 18 claims.” (Resp. MD (Doc. 45) at 30.) Plaintiffs are correct that Defendants’ challenge to 19 Count II and III is “a factual disagreement and should be saved for a motion for summary 20 judgment and, if necessary, for trial.” Id. 21 d. Argument: Technologically Incapable of Violating Truth in Caller ID Act 22 Defendants’ Motion to Dismiss, likewise, fails for the Truth in Caller ID Act claims 23 alleged in Count V. Plaintiffs allege that Defendants violated 47 U.S.C. § 227 (e), a 24 provision of the Truth in Caller ID Act, by “knowingly causing the caller identification 25 services of the recipients of [Defendants’] call traffic to transmit misleading or inaccurate 26 caller identification information including spoofed or otherwise misleading and inaccurate 27 phone numbers.” (Complaint (Doc. 1) ¶ 457.) “No person or entity in the United States . . 28 . shall, with the intent to defraud, cause harm, or wrongfully obtain anything of value, - 27 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 28 of 35 1 knowingly cause, directly, or indirectly, any caller identification service to transmit or 2 display misleading or inaccurate caller identification information in connection with any 3 voice service or text messaging service.” 47 C.F.R. § 64.1604 (emphases added). See also 4 United States v. Rhodes, No. CV 21-110-M-DLC-KLD, 2022 WL 2466796 , at *7 (Mont. 5 Apr. 1, 2022), report and recommendation adopted, No. CV 21-110-M-DLC, 2022 WL 6 17484847 (Mont. Dec. 7, 2022) (finding liability accrues under 47 U.S.C. § 227 (e) when 7 the entity causing the transmission of misleading caller identification information did so 8 knowingly). 9 The critical inquiry is whether Plaintiffs allege sufficient facts to support the charge 10 that Defendants knowingly caused caller identification services to transmit or display 11 misleading information, even if they did so indirectly. Defendants argue that Avid Telecom 12 is not technologically capable of altering caller identification information, therefore, it 13 cannot engage in illegal spoofing and all the call numbers are owned by the customer and 14 initiated as an outbound call number as selected by the customer. (MD (Doc. 39) at 29.) 15 “Avid Telecom has neither the opportunity nor ability to alter or spoof the originating 16 number.” Id. Plaintiffs respond that a simple internet search for the most common phone 17 numbers appearing in Avid Telecom’s call-traffic, or just periodically analyzing its own 18 records of its traffic would have revealed many numbers transiting its network that were 19 being illegally spoofed by its customers. The Court does not consider the merits of these 20 assertions because, again, Defendants make arguments based on evidence outside the 21 pleading that are appropriate for consideration on summary judgment or at trial. 22 Considering the factual allegations as pled in the Complaint, it is alleged that 23 Defendants transmitted calls with obviously spoofed phone numbers for law enforcement, 24 government, and corporate phone numbers. (Complaint (Doc. 1) ¶¶ 93, 94.) Defendants 25 facilitated call traffic with clear indicia of fraudulent spoofing, such as high volumes of 26 calls where the calling phone number matches the area code and exchange code of the 27 recipient’s number to falsely appear as a local call. Id. ¶ 88 . The Plaintiffs allege numerous 28 instances when Defendants were alerted by the Industry Traceback Group (ITG) and other - 28 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 29 of 35 1 third parties to the fraudulent traffic being transited by Defendant Avid Telecom’s network, 2 including illegal and/or fraudulent calls with spoofed phone numbers. Id. ¶¶ 97-110 . The 3 Court concludes that the Complaint amply alleges that Defendants were clearly aware that 4 they routinely transmitted calls with illegally spoofed phone numbers. Id. ¶¶ 111, 180, 184 , 5 233, 235, 288, 290, 292, 294, 367. 6 e. Argument: Various State Statutes 7 The Court notes that Defendants’ Reply does not contest Plaintiffs’ argument in the 8 Response objecting to dismissal of state law claims. While a Reply is optional, LRCiv. 9 7.2(d), in this case the Defendants filed a Reply, without disputing this objection. For the 10 reasons stated by Plaintiffs in the Response, the Court summarily denies the Motion to 11 Dismiss these counts, Counts VI-XXIII. LRCiv. 7.2(i). The Court finds that the Plaintiffs 12 adequately pled these claims with enough particularity regarding the number of calls 13 Defendants transmitted in each state. (Complaint (Doc. 1) ¶¶ 86-89.) The Court rejects 14 Defendants’ argument, presented without any supporting law, that Plaintiffs cannot plead 15 these claims because “people might use their cell phones outside of their home states.” 16 (Resp. MD (Doc. 45) at 33.) 17 Likewise, Defendants offer no rebuttal in the Reply to the Plaintiffs’ arguments in 18 the Response for why the state law claims based on “Auto-dialer Acts,” which are 19 predicated on the TCPA and other federal regulations, should not be dismissed for Indiana, 20 Nevada, and New York. The Court summarily denies this portion of the Motion to Dismiss 21 based on the undisputed and unrebutted arguments made by the Plaintiffs in the Response. 22 See (Resp. MD (Doc. 45) at 33-45.) 23 Denial is especially appropriate because Defendants failed to comply with LRCiv. 24 12.1(c),6 which requires certification that prior to filing a 12(b)(6) motion, the movant 25 notified the opposing party of the issues asserted in the motion and the parties were unable 26 6 While the Court could, it will not, grant Plaintiffs’ Motion to Strike the Motion to Dismiss, pursuant to LRCiv. 12.1(c). The Motion to Dismiss was fully briefed by the parties, and it 27 is evident that there will be no agreement regarding the issues raised in it, except as noted above for the state law claims and the question of personal jurisdiction over Defendant 28 Avid Telecom. Accordingly, striking the Motion to Dismiss would not result in any change in this Order. - 29 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 30 of 35 1 to agree that the pleading was curable in any part by amendment offered by the pleading 2 party. Because Defendants did not comply LRCiv. 12.1(c), the Court cannot assume that 3 the parties considered dismissal of the state law claims and Plaintiffs’ objections prior to 4 them being presented in the Motion to Dismiss. Instead, the Court finds Defendants no 5 longer urge this argument because they do not rebut Plaintiffs’ objections in the Reply. See 6 (Reply MD (no reply to Plaintiffs’ arguments objecting to dismissal of these claims), see 7 also supra above (citing Reply MD (Doc. 49) (same basis for finding general-personal 8 jurisdiction exists over Avid Telecom based on its incorporation in Arizona). In other 9 words, the Court finds these arguments in the Motion to Dismiss are abandoned by the 10 Defendants and, therefore, moot. 11 B. Motion to Stay and Refer to the FCC and FTC 12 Defendants ask the Court to stay the case and refer Count I to the FTC and Counts 13 II-V to the FCC, pursuant to the primary jurisdiction doctrine. As explained by the 14 Defendants, the doctrine is a “‘prudential’ one, under which a court determines that an 15 otherwise cognizable claim implicates technical and policy questions that should be 16 addressed in the first instance by the agency with regulatory authority over the relevant 17 industry rather than by the judicial branch.’” (Motion to Stay and Refer (MSR) (Doc. 30) 18 at 2-3 (quoting Clark v. Time Warner Cable, 523 F.3d 1110, 1114 (9th Cir. 2008) (citing 19 Syntek Semiconductor Co., Ltd. v. Microchip Technology Inc., 307 F.3d 775, 780 (9th Cir. 20 2002)). 21 “In evaluating primary jurisdiction, we consider ‘(1) the need to resolve an issue 22 that (2) has been placed by Congress within the jurisdiction of an administrative body 23 having regulatory authority (3) pursuant to a statute that subjects an industry or activity to 24 comprehensive regulatory authority that (4) requires expertise or uniformity in 25 administration.’” Astiana v. Hain Celestial Grp., Inc., 783 F.3d 753, 760 (9th Cir. 2015) 26 (quoting Syntek, 307 F.3d at 781 ). 27 It is important to note that not every case that implicates the expertise of federal 28 agencies warrants invocation of primary jurisdiction. The doctrine is reserved for a “limited - 30 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 31 of 35 1 set of circumstances” that “requires resolution of an issue of first impression, or of a 2 particularly complicated issue that Congress has committed to a regulatory agency.” Clark, — 3 — 523 F.3d at 1114 (quoting Brown v. MCI WorldCom Network Servs., 277 F.3d 1166 , 1172 4 (9th Cir.2002)) (internal quotation marks omitted). 5 The court in Brown set out the parameters for applying the four Astiana factors and 6 explained the doctrine is NOT intended to “secure expert advice” for the courts from 7 regulatory agencies every time a court is presented with an issue within the agency's ambit. 8 Brown, 277 F.3d at 1172 (citing United States v. General Dynamics Corp., 828 F.2d 1356 , 9 1365 (9th Cir.1987)). “Primary jurisdiction is properly invoked when a claim is cognizable 10 in federal court but requires resolution of an issue of first impression, or of a particularly 11 complicated issue that Congress has committed to a regulatory agency.” Id. (citing Texas 12 & Pacific Ry. Co. v. Abilene Cotton Oil Co., 204 U.S. 426, 442 (1907)). “‘The doctrine 13 applies when protection of the integrity of a regulatory scheme dictates preliminary resort 14 to the agency which administers the scheme.’” Id. (quoting General Dynamics, 828 F.2d 15 at 1362) (internal quotation marks and citation omitted). 16 Defendants’ request to stay and refer the case pursuant to the primary jurisdiction 17 doctrine requests the referral as a means for obtaining “expert advice.” See (Reply MSR 18 (Doc. 48) at 4 (explaining referral affords the Court the benefit of obtaining expert advice 19 without ceding jurisdiction; accusing Plaintiffs of seeking to keep the Court from obtaining 20 expert advice); at 7 (referral makes expert agency available to provide its expert opinion(s) 21 to the Court upon request); at 9 (after the referral, the Court retains authority and ability to 22 rule as it sees fit, while providing a procedure for it to obtain expert advice). Like the 23 Plaintiffs, the Court understood the needed expert advice was “based solely on Defendants’ 24 assertions about the purported ‘open issues’ concerning the definition of “consent” under 25 the TCPA and TSR.” (Resp. MSR (Doc. 42) at 6 (citing MD (Doc. 30) at 6, 8, 9, 10.) 26 Plaintiffs are correct that “[i]n the Ninth Circuit, consent in the telemarketing space 27 is not a matter of first impression, and it is not a particularly complicated legal issue 28 requiring the FTC’s or FCC’s expertise.” Id. at 6 , see Moskowitz v. Am. Sav. Bank, F.S.B., - 31 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 32 of 35 — 1 — 37 F.4th 538, 541 (9th Cir. 2022) (finding consent exists where a person “knowingly 2 releases” his or her telephone number, and it is “‘effective’ whe[n] the responsive messages 3 relate to the same subject or type of transaction” which initially prompted the person to 4 share his or her telephone number) (relying on Van Patten v. Vertical Fitness Grp., LLC, — 5 — 847 F.3d 1037, 1044-45 (9th Cir. 2017); In re Rules & Regulations Implementing the 6 Telephone Consumer Protection Act of 1991, 7 F.C.C. Rcd. 8752, 8769 (Oct. 16, 1992)), 7 see also Berman v. Freedom Fin. Network, LLC. 30 F.4th 849, 853 (9th Cir. 2022) (finding 8 consent when obtained via websites, using a two-part test to determine whether terms and 9 conditions presented on websites provide “reasonably conspicuous notice” as to bind its 10 users to terms of the agreements); Unified Data Servs., LLC v. Fed. Trade Comm'n, 39 11 F.4th 1200 , 1204 (9th Cir. 2022) (citing 16 C.F.R. § 310.4 (b)(1)(v): “In 2008, the FTC 12 amended the [TSR] to prohibit unsolicited robocalling in the form of ‘any outbound 13 telephone call that delivers a prerecorded message’ by telemarketers without prior consent 14 from the consumer.”); Trim v. Mayvenn, Inc., No. 20-CV-03917-MMC, 2022 WL 15 1016663, at *4 (N.D. Cal. Apr. 5, 2022) (citing 15 U.S.C. § 6153 and finding TCPA’s 16 provision for business relationship (“EBR”) defense should be construed to maximize 17 consistency with the identical TSR provision). The Court agrees with Plaintiffs that there 18 is ample law in the Ninth Circuit for this Court to address questions about consent if 19 Defendants raise the issue as an affirmative defense in this action. 20 The Court notes that consent is not an element of the Plaintiffs’ prima facie case 21 under the TCPA but is an affirmative defense. “Prior express consent is a complete defense 22 to ... [a] TCPA claim.” Van Patten, LLC, 847 F.3d at 1044 . (9th Cir. 2017). As such, there 23 being no answer yet filed by Defendants, consent is not at issue in this case. The Court 24 does not consider this technicality to be dispositive in relation to the motion to refer. The 25 deciding factor upon which this Court relies was presented by Notice of Supplemental 26 Authority7 filed by Plaintiffs on December 22, 2023, attaching the Second Report and 27 Order released by the FCC on December 18, 2023. One of Defendants’ central arguments — 28 — — 7 — Defendants do not object to this supplemental filing. - 32 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 33 of 35 1 under the primary jurisdiction doctrine for staying and referring the case was to afford the 2 FCC an opportunity to consider the then pending Further Notice of Proposed Rulemaking 3 (FNPRM) and Notice of Inquiry ( FCC 23-107 ) and corresponding “open issues.” Now, 4 those open issues have been addressed by the FCC. 5 This brings the Court to the next reason for denying the motion. Defendants provide 6 only broad sweeping reasons for referring this case under the primary jurisdiction doctrine. 7 Defendants’ approach would require referral of every case brought in a court of law that 8 involves the federal regulations overseen by the FCC and FTC. For example, Defendants 9 believe the claims brought by Plaintiffs “are subject to such significant and current legal 10 and regulatory uncertainty that needs to be resolved for the Court to properly adjudicate 11 issues in this proceeding.” (Reply MSR (Doc. 48) at 9.) Defendants submit there “is a 12 critical need for the involvement of an expert agency to ensure national uniformity,” as 13 follows: 14 Piecemeal decision-making by individual courts across the nation does not work in a dynamic industry like telecommunications—which requires a deep 15 understanding of the policy implications of key policy decisions—and common set of known and understood rules—that are applied regardless of 16 where a call originates or terminates. The current chaotic patchwork of rules and regulations will become irretrievably unmanageable—posing a threat to 17 our critical telecommunications infrastructure—if each court is allowed to create its own regulatory framework. — 18 — — 19 — Id. They assert “[t]his case is literally the paradigm of a case where the primary jurisdiction 20 doctrine should be applied.” Id. Defendants do not specify the issues the allegedly legal 21 and regulatory uncertainties apply to or say what issues require uniformity, clarification, 22 or decisions by the agency before the court can adjudicate them. 23 In an effort to satisfy the exclusivity of the doctrine, Defendants argue that 24 “consent” is only one of several essential open issues necessitating referral but fail to 25 provide even one reference to such “other” open issue(s). Instead, they refer to a form of 26 Order they submit for the Court to issue upon granting the motion. It contains a laundry 27 list of approximately eight issues to refer under the doctrine. Id., Ex. 1 (Doc. 48-1) at 3.8 28 8 The Court denies the Motion to Strike, pursuant to LRCiv. 7.2(m), filed by Plaintiffs for Exhibit 1, the form of order, and White Paper attached to the Reply. The Court “may - 33 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 34 of 35 1 Without any explanation as to why and how these eight questions, once answered 2 by the agency, should factor into this Court’s decision on the merits of which issues, the 3 Court is forced to read between the lines to determine what “other” open issues might exist 4 beyond those related to Defendants’ desire to raise the affirmative defense of consent. The 5 proposed questions seem to challenge Plaintiffs’ reliance on Industry Traceback Group 6 notices that Avid Telecom was being used illegally in violation of TCPA and TSR. The 7 Court is capable of assessing the relevancy of proffered evidence. Additionally, Defendants 8 want to ask the FCC if a VoIP-based provider of long-distance telecommunications 9 services is a common carrier subject to applicable exemptions. As noted above in reference 10 to the Motion to Dismiss, whether the common carrier exception applies turns on facts not 11 yet developed in this case. There is nothing overly complicated about the law the Court 12 will apply to determine whether the exception applies to Avid Telecom. 13 While Defendants assert “[e]very predicate element of the test is plainly satisfied,” 14 (Reply MSR (Doc. 48) at 9), the motion to refer fails based on the first element: whether 15 there is a need to stay and make an agency referral to resolve an issue. There is no matter 16 of first impression or a particularly complicated issue; there is no clear risk of conflicting 17 judicial versus administrative opinions. This case does not involve technical or policy 18 considerations outside the conventional experience of judges. There is no need to stay and 19 refer this case to either the FCC or FTC. The Court denies the motion because this case 20 does not involve any of the limited set of circumstances that have been reserved for 21 administrative resolution under the primary jurisdiction doctrine. 22 Accordingly, 23 IT IS ORDERED that the Motion to Stay and Refer (Doc. 30) is DENIED. — 24 — decline to consider new evidence or arguments raised in reply, and generally should not 25 consider the new evidence without giving the non-movant an opportunity to respond.” Salazar v. Driver Provider Phoenix LLC, No. CV-19-05760- PHX-SMB, 2022 WL 26 17824287, at *1 (D. Ariz. Dec. 8, 2022) (internal citations removed). The Court did not base the denial of the Motion to Stay and Refer on Plaintiffs’ LRCiv. 12.1(c) arguments, 27 therefore, the White Paper was not relevant and not considered. See Reply MSR (Doc. 48) at 3 n.2 (proffering White Paper to dispel arguments of surprise). The Court did not find 28 Exhibit 1, the form of Order, to be evidentiarily persuasive. There was no need to afford Plaintiffs an opportunity to respond. - 34 - Case 4:23-cv-00233-CKJ Document 64 Filed 05/08/24 Page 35 of 35 1 IT IS FURTHER ORDERED that the Motion to Dismiss (Doc. 39) is DENIED. 2 IT IS FURTHER ORDERED that the Motions to Strike (Docs. 50 and 51) are 3 DENIED AS MOOT. 4 IT IS FURTHER ORDERED that the Motion to Strike Supplement Re: Motion 5 to Dismiss (Doc. 63) is GRANTED. 6 IT IS FURTHER ORDERED that within 14 days of the filing date of this Order, 7 the Plaintiffs have leave to file an amended Complaint to state an alter ego claim of 8 individual liability against Defendant Lansky. 9 IT IS FURTHER ORDERED that in the event, Plaintiffs do not amend the 10 Complaint, the Defendants shall file an Answer by June 14, 2024. 11 Dated this 8th day of May, 2024. — 12 — — 13 — — 14 — — 15 — — 16 — — 17 — — 18 — — 19 — — 20 — — 21 — — 22 — — 23 — — 24 — — 25 — — 26 — — 27 — — 28 — - 35 -