The Court of Appeals for the Fourth Circuit has agreed with a lower court’s ruling that a group of lawyers and debt relief companies did not engage in “sham litigation” when they allegedly lured individuals into filing lawsuits against student loan giant Navient for violating the Telephone Consumer Protection Act.
The background: The case stemmed from a 2019 civil lawsuit filed by Navient, which accused a group of lawyers and debt relief businesses of conspiring to defraud the company. Navient claimed that the defendants recruited student borrowers to stop paying their loans and coached them on how to revoke consent for automated calls, thereby setting up claims under the TCPA.
- The defendants allegedly filed numerous lawsuits on behalf of the borrowers, arguing that Navient’s telemarketing practices violated the TCPA. Navient contended that this was a fraudulent scheme to avoid loan payments, characterizing the actions as a “sham” to extract settlements and avoid repaying the student loans.
- Navient’s case included claims of racketeering, fraud, and tortious interference with contracts, and sought millions in damages.
- A jury initially ruled in favor of Navient, but a District Court judge granted a motion for judgment as a matter of law from the defendants, stating that their TCPA suits were not “sham litigation” and therefore, their petitioning activity was protected under the First Amendment’s right to petition the government. Navient appealed, arguing that the TCPA suits were meritless and amounted to an abuse of the judicial process.
The ruling: The Fourth Circuit upheld the lower court’s decision, ruling that the defendants’ actions were indeed protected by the First Amendment under the Noerr–Pennington doctrine, which shields individuals from liability for petitioning the government, including filing lawsuits. The court applied the “sham litigation” exception, which only applies if the litigation is shown to be objectively meritless.
- In this case, the court determined that while certain aspects of the lawsuits may have been questionable, the legal issue central to the cases — whether Navient violated the TCPA by using an ATDS — was a legitimate one.
- The court further noted that Navient conceded that the TCPA cases had merit at the time they were filed, as courts were divided on the interpretation of the ATDS definition before the Supreme Court’s ruling in Facebook, Inc. v. Duguid in 2021. As such, the Fourth Circuit affirmed the judgment, finding no legal basis for Navient’s claims.
