HOW BIG IS THIS?: Repeat TCPA Litigator Must Face Fraud Claim and It May Change Everything We Know About "Fake Lead" TCPA Class Actions

Very rarely does a single district court ruling completely change litigation strategy and class action dynamics. But this one really may have done just that. Very important case.

But first, some background.

So pretty much everybody out there knows I created R.E.A.C.H., but not everyone knows why.

Troutman Amin, LLP often represents large-scale lead buyers–companies that are in the direct-to-consumer space and rely on third-parties to detect interest in consumers and help to connect those consumers with the lead buyer who will offer products and services the consumer wants.

Our clients rely on representations from the lead seller that the leads are valid and a real consumer is asking for contact. When that turns out not to be the case–i.e. when the lead supplier has provided a “fake lead”–it can lead to a massive TCPA lawsuit. And since the lead suppliers are often small companies whereas our clients are often massive ones, it is the innocent lead buyer–as opposed to the bad-guy lead seller–that faces the risk.

But there is another bad guy element to these cases– repeat litigators who will often use the specter of lead fraud to set up their own lawsuits.

The scam goes like this.

Repeat litigator fills out a form (or has someone else do it for them) using their real phone number but other fake data elements–wrong name, or email address, or address.

Sometimes the names used will be close. Sometimes far off. Sometimes email addresses are almost right. Sometimes they’re totally random.

The more pernicious litigator might attack the same website multiple times to generate multiple leads over a series of days to run up a higher call count before suing.

Then they will turn around and claim they never filled out the form. They will claim “lead fraud” was the culprit and hire a class action attorney.

The class action attorney will then demand the caller produce every record of every call they’ve ever made and every record of consent from the lead supplier. And sometimes it works–courts, indeed, sometimes compel a caller to produce MASSIVE quantities of data ins a set-up TCPA suit.

This, of course, leads to class settlements. And the wheel of time turns onward.

All of this is enabled, of course, by the fact that some “fake leads” do exist–and that is what provides cover and plausible deniability to the repeat litigators that set up their own lawsuits.

And THAT is why is started R.E.A.C.H.– to put an end to fake leads, stop unwanted calls and–most importantly– end the repeat litigator phenomenon once and for all.

But there is another tactic that can be used to thwart the fake litigator syndrome– fighting fire with fire.

In Jackson v. Direct Building Suppliers, 2024 WL 1721144 (M.D. Pa. April 22, 2024) a court just upheld a lead buyer’s ability to sue a litigator for fraudulently submitting a lead form and I can sincerely think of no reason why such counterclaims won’t be brought in every “fake lead” case from now on.

As alleged in the counterclaim– Jackson went on a website and submitted ‘opt-in’ data
requesting a phone call. The data provided Jackson’s phone number and his home address under the name Barry Johnson. An “apparent fake email address of ‘bluebrrd@gmail.com’ ” was also submitted by Plaintiff. (Ya’ll might want to check your records to see if you have a bluebrrd running around in there.)

On September 28, 2021, a third-party vendor contacted Jackson. After confirming his interest, the third-party vendor transferred Plaintiff to Defendant’s representative. (We see this all the time right? Call center contacts litigator who feigns interest.)

Over the course of this call, Jackson responded to “Barry” and “Mr. Johnson” and “feigned an interest in purchasing solar products from” Direct Building Supplies. 34 This individual gave Defendant both Jackson’s home address and another seemingly fake email address of “bluebird3224@gmail.com” and “requested an at home appointment … to purchase solar products.” The representative then “confirmed an appointment at Plaintiff’s home on Friday, October 8, 2021,” and Jackson requested that information be sent to “bluebird3224@gmail.com” so that he may “review the company performing the work.”

Plaintiff sued Defendant alleging his lead was fake and that he merely played along with the caller to see who had made the calls. This is a common trick in TCPAWorld and many courts have tolerated it.

But Direct Building Supplies refused to play that game. And they countersued Plaintiff for fraud arguing that the submission of the fake lead caused it damage in the form “of
ongoing fees and costs, prior expenditures, and reputational damage.”

The Court agreed with DBS– it found the conduct alleged in the counterclaim (i.e. Plaintiff submitted a fake lead) was sufficient to state a claim for fraud. That means a jury will need to determine if the lead was fraudulent or not and–if so– it may award damages to the Defendant. Of course, if the lead is fraudulent the claim may still continue against DBS.

Notably DBS also sued the lead source here– TechMedia Group. So they are really going to battle with a shotgun–and I love to see it.

Importantly–as I already suggested–I see no reason why similar counterclaims cant be brought in every TCPA suit arising out of an alleged fake lead. Not only does this give the Defendant the satisfaction of being able to pursue a bad-guy repeat litigator, it also is a class action killer– there is simply no basis to believe mass fraud takes place on websites. So there is no one in a “similar” position to the Plaintiff that has set up their own claim.

Very fascinating and something class action defense lawyers REALLY need to be paying attention to.

Of course the Law Conference of Champions will be exploring similar topics in great detail and if you are in the lead generation, performance marketing, direct to consumer, B2B, adtech, digital advertising, AI or telesales game you will not want to miss a minute of it!