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June 17th, 2013

SCOTUS Puts Roadblock Between Lawyers Trolling for Clients and Private DMV Records

The U.S. Supreme Court today ruled that plaintiffs’ lawyers may not use confidential DMV records to troll for clients.  ATRA profiled the underlying Fourth Circuit decision, which the Supreme Court reversed, as among the worst reasoned federal appellate cases of 2012 in its annual Judicial Hellhole report.

A federal law, the Drivers Privacy Protection Act of 1994, does not allow people to obtain DMV records, which contain private personal information, to solicit business.  The law, however, contains an exception for uses “in connection with” litigation.

A plaintiffs’ law firm sought to bring a class action targeting administrative fees allegedly charged by 51 automobile dealerships in South Carolina.  The only problem was that the lawyers did not have clients who had purchased cars from many of the dealerships.  The plaintiffs’ lawyers filed several Freedom of Information Act (FOIA) requests with the state DMV to find more plaintiffs.  In a stroke of bad luck, one of the recipients of a solicitation letter happened to be Edward Maracich, who not only had purchased a car from a particular dealership, but was the dealership’s director of sales and marketing.  He, and others who received the solicitations, turned the tables and sued the plaintiffs’ law firm for violating their privacy rights.

In Maracich v. Spears, a divided Court ruled that the Drivers Privacy Protection Act does not allow a lawyer to use DMV records where the predominant purpose is to obtain, use, or disclose protected personal information to solicit new clients.  Justice Kennedy, writing for the majority, found that the litigation exception protects the ability of lawyers to seek information in ongoing cases in which they already represent someone.  The law “has a limited scope to permit the use of highly restricted personal information when it serves an integral purpose in a particular legal proceeding.”  Plaintiffs’ lawyers may not, the Court found, “acquire highly restricted personal information from state DMV records to send bulk solicitations without express consent from the targeted recipients.”

A broader interpretation of “in connection with” litigation that allows use of private information so long as it can be tied to some existing litigation, as the plaintiffs’ lawyers suggested, would let them get around the law by simply filing a “placeholder lawsuit.”  As the Court recognized, “All an attorney would need is one friend or family member as his client before being able to gain access to DPPA-protected personal information to solicit persons to fill in as plaintiffs.”

Both the majority and dissent recognized that the decision could expose the plaintiffs’ lawyers to astronomical liability, since the federal law authorizes an amount of damages no less than $2,500 per violation, plus reasonable attorneys’ fees and litigation costs, and the lawyers had sent solicitation letters to 30,000 people.  Punitive damages are also available if the conduct shows willfulness or a reckless disregard of the federal law.  The majority addressed this concern by noting that if the statute resulted in an excessive award, due process or other principles might require its reduction, and that the plaintiffs’ lawyers had other potential defenses to liability that were not before the Court.

One would hope that the Court would equally apply this concern to other businesses, who frequently face extraordinary statutory liability applied on a per violation basis to thousands of claims in various contexts.  After all, as the majority recognized, the lawyers were acting as a business, not in their capacity as lawyers, when sending the solicitation letters.

The decision did not split entirely on typical ideological lines.  Justices Roberts, Thomas, Breyer and Alito joined Justice Kennedy’s majority opinion.   Justice Ginsberg’s dissent was joined by Justices Scalia, Sotomayor, and Kagan.

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