Just in time for the holidays, the Second Circuit’s recent decision in Bank v. Independence Energy Group LLC has dropped a lump of coal in the business community’s stocking. In this case, the “lump of coal” is an open door to class actions under the Telephone Consumer Protection Act in federal courts in New York.

We frequently blog about the TCPA, which has emerged into one of the favorite toys of the plaintiffs’ bar. The TCPA authorizes the recipients of certain unsolicited telemarketing faxes, calls, and text messages to sue for statutory damages of between $500 to $1,500 per violation. If those statutory damages are aggregated in a class action, plaintiffs’ counsel can threaten the targeted defendant with such enormous liability—sometimes in hundreds of millions or billions of dollars—that the defendant will have a powerful incentive to agree to a blackmail settlement. (See some of our recent posts on challenging this kind of aggregation and on new developments regarding consent and vicarious liability under the TCPA.)

Until the Second Circuit’s recent decision in Bank, defendants facing TCPA class actions in New York had a strong defense. That’s because the TCPA permits suits only “if otherwise permitted by the laws or rules of court of a State” (47 U.S.C. § 227(b)(3)), and a New York statute specifies that a class action “may not be maintained” to recover a “penalty” or statutory “minimum” damages (N.Y. CPL § 901(b)). The New York ban on class actions seeking statutory damages forbids TCPA class actions in state court. And the Second Circuit previously had held that the New York law also bars TCPA class actions in federal court, because the TCPA itself forbids such suits when not “permitted by the laws * * * of a State.” See, e.g., Bonime v. Avaya, Inc., 547 F.3d 497 (2d Cir. 2008).

The plaintiffs’ bar has devoted years to attacking that approach. Plaintiffs based their first major argument on the Supreme Court’s holding in Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., 130 S. Ct. 1431 (2010), that the New York law did not apply to class actions brought in federal court under the Class Action Fairness Act of 2005. But the Second Circuit held firm, sensibly concluding that allowing plaintiffs a federal forum for TCPA class actions in New York was irreconcilable with the deliberately state-centric language of the statute, which “delegate[d] * * * to the states [] considerable power to determine which causes of action lie under the TCPA.” Holster III v. Gatco, Inc., 618 F.3d 214, 217 (2d Cir. 2010).

Plaintiffs tried again in the wake of the Supreme Court’s subsequent decision in Mims v. Arrow Financial Services, LLC., 132 S. Ct. 740 (2012). Mims resolved a circuit split on whether federal courts had jurisdiction over TCPA lawsuits; the Court concluded that they do, determining that there was “no convincing reason to read into the TCPA’s permissive grant of jurisdiction to state courts any barrier to the U.S. district courts’ exercise of the general federal-question jurisdiction they have possessed since 1875.”

The plaintiffs’ bar has had much more success invoking Mims; they have persuaded the Second Circuit that Mims means that the “if otherwise permitted” clause of the TCPA no longer may be interpreted as imposing state procedural requirements on TCPA lawsuits brought in federal court. In its first post-Mims decision, Giovanniello v. ALM Media LLC, the Second Circuit concluded that a TCPA action in Connecticut federal court was governed by the federal four-year catch-all statute of limitations, not the shorter state limitations period. At this point, defense attorneys began bracing themselves for similar treatment of the New York bar on class actions seeking statutory damages.

Now, the other shoe has dropped. In Bank, the Second Circuit held that Mims also deprives federal defendants of the protection of the New York state statute. Instead, the Second Circuit explained, Federal Rule of Civil Procedure 23 alone controls whether a TCPA suit may proceed as a class action. The quixotic result is that in New York, the federal courts may be required to entertain TCPA lawsuits that state courts cannot hear.

We’ll continue to watch this issue. In the meantime, we noticed a common thread running throughout the Second Circuit decisions cited here: the plaintiff’s attorney, Todd C. Bank, who represented the named plaintiffs in Holster and Giovanniello—and now himself in Bank. Mr. Bank’s recent victories before the Second Circuit in TCPA cases stand in contrast to his unsuccessful effort to persuade the Second Circuit of his constitutional right to wear an “Operation Desert Storm” baseball cap in Queens Civil Court. Baseball cap or not, it will be interesting to see whether Bank will be able to proceed with his proposed class action given the long-standing rule that a putative class counsel cannot also serve as class representative.