This is an action for a permanent injunction, statutory damages, attorneys= fees, and costs under the federal Telephone Consumer Protection Act, 47 U.S.C. ' 227 (TCPA, or, the act). Defendant Integrated Credit Solutions (ICS) has moved to dismiss the complaint based on a failure to state a cause of action. CPLR 3211(a)(7).

The complaint alleges that ICS is a for-profit telemarketer that used pre-recorded messages to sell its own commercial goods and services; that those pre-recorded calls were not made Aon behalf of@ a nonprofit organization, and; that ICS is not entitled to an exemption under the TCPA since its pre-recorded telemarketing was for a commercial, rather than a nonprofit, purpose.

ICS is a for-profit corporation engaged in the telemarketing business. ICS sends out thousands, and sometimes millions, of unsolicited pre-recorded phone messages, on a daily basis, to United States households. ICS=s pre-recorded message delivers a sales pitch and urges consumers to contact ICS. ICS telemarketers solicit payment of enrollment, or educational fees, to ICS, in order for consumers to enroll in credit counseling offered by Lighthouse Credit Foundation. ICS telemarketers also have solicited new customers for mortgage lenders.

Lighthouse Credit Foundation, Inc. (Lighthouse), not named as a defendant, is a Florida nonprofit corporation that provides credit counseling and debt management services to consumers. Lighthouse claims to assist consumers in paying unsecured debts by negotiating with creditors on the consumer=s behalf, preparing a debt payment schedule agreeable to the debtor and the debtor=s creditors, and collecting monthly scheduled payments from the debtor, and distributing payments to creditors. Lighthouse receives Afair share@ payments for its services from the institutional creditors, based on a percentage of the debt repaid by the debtor. Creditors typically only pay Afair share@ payments to nonprofit organizations. Many states, including New York and Florida require credit counseling organizations to be nonprofits.

To help Lighthouse get started, ICS paid Lighthouse $65,000 in an undocumented transaction. Initially, Lighthouse shared ICS=s office space, and ICS deferred Lighthouse=s obligation to pay rent. Lighthouse and ICS also shared the same telephone system. Lighthouse subsequently moved to a different office in the same complex as ICS.

The establishment of Lighthouse was part of a business plan by Flagship=s management, including Melcer and others, to generate business for Flagship. ICS=s telemarketing operation was used to solicit up-front fees and additional fees directly to Flagship, all through the controlled relationship with Lighthouse.

The complaint alleges that the challenged pre-recorded calls by ICS identify only ICS, not any nonprofit entity, sell ICS=s own goods and services, solicit money payable to ICS, and that the calls were in fact made by and for ICS, not on behalf of a nonprofit entity.

The TCPA ' 227 states:

47 U.S.C. ' 227(b)(1)(B).

47 CFR ' 64.1200 (a) (2) (v).

On a motion to dismiss for failure to state a cause of action, every fact alleged must be assumed to be true and the complaint liberally construed in plaintiff=s favor. Barr v Wackman, 36 NY2d 371 (1975). A complaint should not be dismissed so long as a cause of action exists. Rovello v Orofino Realty Co., 40 NY2d 633 (1976).

ICS argues that the complaint describes conduct that has been exempted from TCPA=s prohibitions by the FCC rules implementing the TCPA, citing In the Matter of the Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, Report and Order, CG Docket No. 02-278, & 128 (Adopted June 26, 2003)(FCC Rules). ICS quotes a portion of FCC Rule & 128 in support of this argument:

While this extract is a verbatim quote, gleaned from the FCC Rules, at & 128, it fails to tell the whole story. The balance of & 128 states, in relevant part:

This expanded excerpt makes clear that the FCC was concerned with commercial callers attempting to benefit from the TCPA exemption for nonprofit organizations when it drafted these rules. The FCC sought comment on the applicability of the Aby or on behalf of@ exemption to professional fundraisers. The FCC Rules describe the comments received in response to a 2002 Notice:

Many commentators, while supportive of the exemption for calls by nonprofits, were concerned that it frequently has been used to veil what is in reality a commercial venture. Some commenters emphasized that Athe TCPA nonprofit exemption should not function as an artifice for an inherently commercial enterprise.@ NAAG, for example, maintained that calls that serve to benefit for-profit companies (in whole or in part) are not calls by or on behalf of nonprofits and should remain subject to the TCPA=s restrictions. The Association of Fundraising Professionals similarly asserted that this type of nonprofit/for profit initiative does not represent a Apure@ charitable appeal; that the primary purpose of such a transaction is the receipt of a product or service by the consumer, not the charitable transfer of funds. *** (Internal footnotes omitted).

Defendants argue that the complaint alleges that the challenged calls were made on behalf of tax-exempt nonprofit entities, and that it is therefore Adifficult to discern a rationale for filing the Complaint.@ Defendants Memorandum of Law in Support, p. 9. Defendant further claims that its absolute exemption from the operation of the TCPA is not lost by the fact that defendants were paid for the telemarketing services they provided to nonprofit organizations. Id. at 10. Further, claim defendants, they have met the formal requirements of identifying the calling party and stating a return phone number for customers to call in their pre-recorded messages.

Defendants= arguments, however, emphasize form over substance, claiming that their telemarketing efforts comply with the letter of the law, while the complaint alleges a violation of the spirit of the law. Plaintiffs= complaint alleges that defendants are circumventing the intent of the TCPA through a thinly veiled, but improper, identity of interest and relationship between ICS, a for-profit organization, and the various nonprofit organizations for which it performs telemarketing services. This claim is sufficient to withstand a motion to dismiss for failure to state a cause of action.

Defendant=s motion to dismiss the complaint is denied. ICS has zealously argued the merits of its claimed exemption from the applicability of the TCPA. However, defendant has failed to sustain its burden of establishing that the complaint fails to state a cause of action. Most, if not all, of defendants= arguments are more appropriate for consideration on a motion for summary judgment.

ORDERED that defendants= motion to dismiss the complaint is denied; and it is further