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The fight against robocalls

In recent years, telemarketers have used technology to pester consumers with prerecorded calls that are unwanted, frequently deceptive, and total in the hundreds of millions, nationally. If you answer the phone, and hear a recorded message instead of a live person, it is a robocall. Many of these are probably scams. Oftentimes, these robocalls are run by scammers using autodialed, prerecorded messages to target unsuspecting consumers to steal money, personal information, or both.

To get consumers to answer these robocalls, scammers often fake the name and number that shows up on your Caller ID. This practice is called spoofing. Common methods of spoofing include using local phone numbers, known as neighbor spoofing, or numbers that resemble those of government agencies and legitimate businesses to fool consumers into thinking that a call is legitimate.

In 2018, in the United States alone, there were 47.8 billion robocalls, an increase of 56.8% over 2017. The U.S. Federal Communications Commission (FCC) receives 200,000 complaints each year reporting robocalls—the largest consumer complaint that the agency deals with regularly. As such, the FCC has made combatting unlawful robocalls and Caller ID spoofing its top consumer protection priority. To help resolve these issues, the FCC recently introduced new rules regarding Caller ID authentication. Additionally, service providers are implementing new technology that will prevent Caller ID spoofing by authenticating Caller ID from the point a call originates and passing along the validation to the Caller ID displayed on a consumer’s phone.

These technology standards are known as the SHAKEN/STIR Caller ID Authentication Framework. The FCC is rapidly attempting to qualify these capabilities. Chairman Ajit Pai recently hosted a summit focused on the industry’s implementation of the technology. The FCC has also issued enforcement actions totaling over $240 million against three telemarketers for apparent Caller ID spoofing. It is also working with industry groups that share information among carriers and providers to help trace the traffic of illegal calls to the originating provider.

Consumers can take self-help measures to lessen the number of robocalls they receive, such as:

  • Ignoring calls from unknown numbers and letting them go to voicemail.
  • If you answer a call and the caller claims to be from a legitimate company or organization, hang up and call back using a valid number found on their website.
  • If you answer and the caller asks you to press a button to stop receiving calls, just hang up.
  • Be aware that Caller ID showing a local number no longer means that it is a local caller.
  • File a complaint with the FCC Consumer Complaint Center.
  • Register your telephone numbers in the National Do Not Call Registry.

D.C. Circuit pushes back on FCC's expansive TCPA view

The D.C. Circuit issued a long-awaited ruling, narrowing a 2015 Federal Communications Commission order that expanded the scope of the Telephone Consumer Protection Act. The D.C. Circuit struck down both the definition of an “autodialer” and strict conditions for calling reassigned numbers, while upholding the FCC’s ruling allowing consumers broad leeway to revoke consent and the scope of an exemption for time-sensitive health care calls. The court’s decision provides instruction for the FCC to issue new rulings and with the recent change in power at the FCC, there is good reason for businesses to be optimistic that the FCC’s next effort will be less onerous on businesses attempting to comply with the law.  We address and analyze the ruling in our TCPA Alert, which may be viewed here.

Ninth Circuit rules on unwanted texts in TCPA case
Recently, the Ninth Circuit held that a gym's promotional text messages sent to a former member constituted a concrete injury, and also explored the issue of what is required to revoke consent, under the TCPA. Our latest TCPA alert discusses what consumer-facing businesses need to know and may be reviewed here.
D.C. Circuit poised to issue precedential ruling in 2017 that may significantly impact TCPA’s reach
2017 opens with a TCPA case before the D.C. Circuit and a new administration that has promised to be business-friendly—Should companies anticipate changes to TCPA's reach? Our latest Class Action Alert addresses what business need to know and may be reviewed here.
Ninth Circuit hears oral argument in TCPA class action against national fitness franchise
The Ninth Circuit considers the scope of the TCPA, highlighting the dynamic nature of interpretations of the statute, and the need for businesses to ensure that they are TCPA-compliant when contacting consumers directly. The case may clarify the definition of an "Automatic Telephone Dialing System" under the TCPA and provide additional guidance to consumer-facing businesses seeking to avoid the threat of costly class action litigation under the TCPA. We provide an analysis in our latest Class Action Alert found here
FTC issues annual Do Not Call Registry Data Book
The FTC has issued its National Do Not Call Registry Data Book for Fiscal Year 2016 (October 1, 2015–September 30, 2016). The Registry allows consumers to register their preference not to receive telemarketing calls. Consumers may register their phone number(s) on the Registry by either calling a toll-free number (888-382-1222) from the telephone number(s) they wish to register or use the do-not-call website (https://www.donotcall.gov). The do-not-call rules require telemarketers and sellers to remove the numbers on the Registry from their call lists at least every 31 days.
 
The Data Book provides statistical data regarding registrations on the Registry, the subscriptions of entities (e.g., telemarketers and sellers) accessing phone numbers on the Registry and the consumer complaints that the FTC has received alleging violations of the do not call rules. At the end of FY 2016, the Registry contained over 226 million actively registered phone numbers, an increase of three million from the prior year. Consumer complaints about unwanted telemarketing calls exceeded 5.3 million in FY 2016, a 1.7 million increase from the prior year. The FTC reported that it received many complaints about telemarketing robocalls that ranged monthly from a low of 134,029 in November 2015 to a high of 265,676 in August 2016.
 
This is the eighth year that the FTC has issued the Data Book, which includes the following useful and interesting information:
 
• The number of active registrations and consumer complaints since the Registry began in 2003;
• FY 2016 complaint figures by month and type;
• FY 2016 registration and complaint figures for all 50 states and the District of Columbia, by population;
• Rankings of the number of Do Not Call registrations, by state population;
• The number of entities accessing the Registry by fiscal year; and
• An appendix with registration and complaint figures organized by state and area code.
 
The FTC has proactively targeted illegal robocalls, including its commencement of enforcement actions. It also recently provided comments to the Federal Communications Commission on the use of robocalls to collect debts owed to the federal government. We will continue to monitor developments with the FTC and FCC regarding the protection of consumers’ interests and privacy against such calls.
Federal district court dismisses TCPA suit for lack of standing under Spokeo, highlighting growing divide among district courts
Last week, the Southern District of California (J. Bencivengo) found that a consumer lacked standing under Spokeo v. Robins, 136 S.Ct. 1540 (2016) to bring suit against Blue Shield of California Life & Health Insurance Co. and SQM US, Inc. for allegedly using autodialers to call cellphones in Ewing v. SQM US, Inc., No. 3:16-cv-1609-CAB-JLB (S.D. Cal.Sept. 29, 2016).  The court held that the plaintiff failed to connect his alleged injuries – including charges for the call, wasted time answering the phone, and depletion of battery – to violations of the TCPA.  Importantly, the court held the plaintiff could not connect his TCPA claim with the use of an autodialer because he did not, and could not, allege that the use of an autodialer “caused him to incur a charge that he would not have incurred had Defendants manually dialed his number, which would not have violated the TCPA.”  While noting that the use of an autodialer may have allowed Defendants to make more calls more efficiently, the court held that a plaintiff’s injury cannot be based solely on the Defendants’ gain, but must be based on the plaintiff’s loss.
 
The Southern District of California is the latest court to rule on dispositive motions in TCPA actions following Spokeo.  In Spokeo, discussed in depth in Nixon Peabody's alert here, the Supreme Court reaffirmed the constitutional principle that for a plaintiff to have standing, the plaintiff must have suffered an actual, concrete injury, even in the context of a claim brought under ta statute that affords private relief for purely procedural violations.  While Spokeo dealt with the Fair Credit Reporting Act (“FCRA”) its specific application to the TCPA has been of great interest to many.  Application of Spokeo in the FCRA arena has found that the type of alleged harm in Spokeo (an incorrect zip code reported) does not rise to the level of “concrete harm” necessary for standing in federal court.  However, in the TCPA context, district courts from Georgia to Washington to West Virginia have held that plaintiffs that have alleged time wasted spent answering robocalls, unavailability of cell phone line during unwanted calls, and monetary injury for lost cell phone minutes of a limited plan have all sufficiently stated concrete harm under Spokeo and therefore have standing to bring suit.
 
The recent Southern District of California decision contains similar reasoning to an earlier decision by Judge Bencivengo from August, holding that plaintiff’s alleged TCPA harm was no greater than if she had received the calls through manual dialing.  And, the District of New Jersey recently dismissed a TCPA action where the plaintiff alleged one unwanted call, noting that a single one-minute call was not the type of pattern or repeatedness of calls that Congress intended to regulate with the TCPA when is sought to prevent “t[ying] up private and business phones.”  These cases, though in the minority, provide a strong argument to refute standing for companies defending against TCPA claims.
 
The different outcomes in district courts will likely play out at federal appeals courts over the next few years, as the post-Spokeo analysis of standing and concrete harm comes into focus.  The issue may very well find itself back before the Supreme Court in the near future, if courts remain so starkly divided.  In the meantime, companies are left with uncertainty as to the standard for concrete harm in TCPA litigation.  However, motions to dismiss for lack of standing under Spokeo are expected to rise in TCPA actions as there appears to be an indication that some courts are willing to strike down complaints under Spokeo.
 
Sixth Circuit’s TCPA decision creates Circuit split over fax cases
On May 9, 2016, the United States Sixth Circuit Court of Appeals reversed the District Court for the Northern District of Ohio’s decision granting the Defendant’s, Alco Vending Inc., motion for summary judgment in a TCPA fax case. In doing so, the Sixth Circuit split with the Seventh Circuit Court of Appeals.

The District Court initially allowed summary judgment in favor of the Defendant because the Court reasoned that the Defendant could not be liable under the TCPA for sending faxes even though it hired B2B ad agency to send faxes advertising its goods and services. It only authorized B2B to send faxes to consenting businesses. It did not authorize transmission to the plaintiff who did not consent to receive such faxes.

The Sixth Circuit reversed and remanded the decision, holding the District Court failed to employ the proper legal standard. Specifically, the Sixth Circuit held that the Defendant’s conduct must be evaluated under the FCC’s regulations that impose liability on the entity “on whose behalf” a fax is sent.

The plaintiff argued that the TCPA imposed strict liability in this type of situation, while the Defendant argued that the only way it could be liable was under a vicarious liability theory. However, both parties acknowledged that “the FCC [had] concluded that an entity [could be] liable for violating the TCPA if an offending fax was sent ‘on behalf of’ the entity.”

The Sixth Circuit declined to apply strict liability, reasoning that the FCC’s current definition of “sender” encompasses “the person or entity…whose goods or services are advertised or promoted in an unsolicited advertisement.” However, the Court held that the current definition of “sender” did not apply because the faxes were sent before this definition went into effect and allowing this definition to apply would expose the Defendant to increased liability.
 
Next, the Sixth Circuit held that the District Court incorrectly relied on the FCC’s Dish Network Order when it applied vicarious liability. Instead, the Sixth Circuit relied on the Eleventh Circuit’s 2015 decision in Palm Beach Golf Center Boca, Inc. v. Sarris and adopted the “on whose behalf” legal standard. The Court reasoned that this standard does not rely on traditional agency law; instead it balances factors such as the amount of control an entity had over the preparation of the faxes, if an entity approved the content of the faxes, and the nature and terms of the parties’ contractual relationship. The Court stated that this approach employed a “middle ground between strict liability and vicarious liability.”
 
Accordingly, the Sixth Circuit remanded the case to the District Court to apply the correct legal standard.
 
The case is Siding & Insulation Co. v. Alco Vending Inc., Case No. 15-3551 in the United States Court of Appeals for the Sixth Circuit.
Nonprofits: 411 on the TCPA Nonprofit Exemption
Name aside, the Telephone Consumer Protection Act’s (“TCPA”) Nonprofit Exemption does not provide blanket protection to nonprofits from the TCPA’s rules and regulations.  Nor does it apply only to nonprofits.
 
The TCPA generally prohibits telemarketers from placing solicitation calls to consumers who are listed on the National Do-Not-Call Registry and creates a private right of action for any person who “has received more than one telephone call within any 12-month period by or on behalf of the same entity in violation of” the implementing regulations adopted by the FCC.  47 U.S.C. §227(c)(5).  Notably, however, under the TCPA, a call placed “[b]y or on behalf of a tax-exempt nonprofit organization” is not considered a “telephone solicitation.”
 
In order to understand the exemption, one must first understand the rule.  Congress enacted the TCPA in response to the increase of intrusive telemarketing calls to consumers’ homes.  Mims v. Arrow Financial Services, LLC, 132 S. Ct. 740, 745 (2012).  The TCPA provides for a Do-Not-Call Registry and also outlaws autodialed and pre-recorded calls made to phone numbers that are not necessarily included in the Do-Not-Call Registry under certain circumstances.
 
First, the TCPA prohibits calls made for telemarketing purposes to persons listed on the National Do-Not-Call Registry.  Telemarketing means the “initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services, which is transmitted to any person.”  47 C.F.R. 64.1200(f)(11).  The regulations also provide that calls made to residential numbers cannot be made before the hours of 8 a.m. or after 9 p.m., 47 C.F.R. 64.1200(c)(1-2), and that companies or persons can only initiate such calls if they have instituted procedures to maintain a list of persons who request not to receive telemarketing calls made on behalf of that person or company.  47 C.F.R. 64.1200(d).
    
Second, the TCPA prohibits any call – other than those for emergency purposes or with prior express written consent – using an autodialing system or an artificial prerecorded voice to residential or wireless numbers.  47 U.S.C. § 227(b)(a).  Such autodialed and pre-recorded calls must include an interactive opt-out recording and must begin by: (1) identifying the organization responsible for the call and (2) providing the telephone number for the organization responsible for the call. 47 C.F.R. 64.1200(b)(1-3).  Additionally, calls made for telemarketing purposes must abide by the “abandonment rules.”  See 47 C.F.R. 64.1200(a)(f).  This includes not abandoning more than three percent of all telemarketing calls answered live over a 30-day period for a calling campaign and providing for an automated opt-out message whenever a live sales representative is not available to speak with the person answering the call within two seconds after the called person’s completed greeting.  47 C.F.R. 64.1200(a)(f)(i-ii).
 
Because the TCPA primarily targets commercial telemarketing activities, it provides exemptions for tax-exempt nonprofit organizations.  47 U.S.C. § 227(a)(4).  Calls to residential landlines are exempt from TCPA liability if, among other things, they are informational or made by or on behalf of a tax-exempt nonprofit organization, such as a charity, an educational institution, or a religious group.  47 C.F.R. 64.1200(a)(3)(ii-iv).  Thus, calls “made by or on behalf” of such entities can be made to residential numbers listed on the Do-Not-Call Registry.  When placing such calls, non-profit entities do not have to institute procedures for maintaining a list of persons who request not to receive telemarketing calls and do not have to abide by the “abandonment rules.” 47 C.F.R. 64.1200(d)(7); 47 C.F.R. 64.1200(a)(7)(iv).  However, though not required, it is considered best practice for nonprofits to adhere to the hour restrictions provided for “telemarketing” calls.
   
Likewise, the rules for autodialed and pre-recorded calls differ in some regards for tax-exempt nonprofits and those making calls on their behalf.  Autodialed and prerecorded calls to residential numbers do not require any prior express (written or oral) consent, while calls to wireless numbers still do require prior express consent. 47 C.F.R. 64.1200(a)(3)(iv); Aranda v. Caribbean Cruise Line, Inc., No. 12 C 4069, 2016 WL 1555576, at *6 (N.D. Ill. Apr. 18, 2016) (“even non-telemarketing, informational calls, such as those by or on behalf of tax-exempt non-profit organizations . . . require either written or oral consent if made to wireless consumers”).  Notably, nonprofits are not exempt from including an organization’s name and number at the beginning of the message.
 
Of course the Nonprofit Exemption’s language then begs the question: What qualifies as a call placed “on behalf of” a nonprofit?  This question is of particular concern because nonprofits often rely on for-profit professional telemarketing firms that assist in fundraising efforts.  Such for-profit firms that specialize in servicing non-profits are likewise keen to ensure that they are not subject to TCPA penalties as a result of placing calls “on behalf of” nonprofits.  Two FCC Orders have helped to clarify this important issue.
 
First, in its 2003 FCC Order, the FCC addressed the scope of the Nonprofit Exemption.  See 18 FCC Rcd. at 14087-14090.  The FCC explained that “calls made by a for-profit telemarketer hired to solicit the purchase of goods or services or donations on behalf of a tax-exempt nonprofit organization are exempt from the rules on telephone solicitation.”  Id. at 14089 ¶ 128.  The FCC made this decision in acknowledgment of the support for-profit fundraisers provide to nonprofit entities and made clear that the TCPA was not meant to prevent such for-profit fundraisers from making calls on behalf of nonprofits.  The Order clarified, however, that if a for-profit organization delivered its own commercial message as part of a telemarketing campaign, “even if accompanied by donations to a charitable organization or referral to a tax-exempt nonprofit organization,” those calls would not qualify for the Nonprofit Exemption.  Id.   For example, sellers that call to advertise a product and state that a portion of the proceeds will go to a charitable cause are not exempt from the TCPA rules.  Id.  This clarification was reaffirmed in a subsequent 2005 FCC Order.  In response to petitions for reconsideration, the FCC stood by its decision that the Nonprofit Exemption does not apply to for-profit companies that call to encourage the purchase of goods or services, even when they pledge to donate a portion of the proceeds to a nonprofit or charity.  20 FCC Rcd. 3799-3800 ¶ 30.
 
Three court cases have further clarified the application of the Nonprofit Exemption to for-profit entities.  The key inquiry is whether the calls are truly made “on behalf of” a nonprofit.  See Fitzhenry v. Independent Order of Foresters, 2015 WL 3711287 (D.S.C. June 15, 2015) and Charvat v. Teleytics, LLC, 2006 WL 2574019 (Ohio App. Aug. 31, 2006).  In Fitzhenry, a for-profit company was placing calls in an effort to sell insurance offered by a nonprofit entity.  In Charvat, a for-profit company placed calls in an attempt to sell credit counseling services offered by a nonprofit entity.  In both cases, the calls were placed by for-profit entities who were promoting goods or services that would be furnished by a nonprofit entity.  Both courts concluded that the calls were covered by the Nonprofit Exemption.
 
Similarly, in Wengle v. DialAmerica Marketing Inc.,132 F. Supp. 3d 910 (E.D. Mich. 2015), the Eastern District of Michigan grappled with the question of whether calls placed by DialAmerica on behalf of a tax-exempt nonprofit, the Special Olympics of Michigan (“SOMI”), were covered by the Nonprofit Exemption.  DialAmerica, a professional fundraiser, was hired by SOMI to conduct a magazine-sale fundraising campaign on behalf of SOMI.  The court ruled that while the Nonprofit Exemption does not apply to telemarketers or companies donating a percentage of their sales to nonprofits, it does apply when it is the charity that collects the proceeds first and has control over the message of the fundraiser.
 
In this case, SOMI eventually received 12.5 percent of the proceeds for subscriptions sold, and it was apparent that DialAmerica was truly working “on behalf of” SOMI, not the other way around.  SOMI had control over the telemarketing prompts and received payments solicited by DialAmerica directly before passing proceeds back to be apportioned among the magazine publisher, the charity, and DialAmerica. Thus, if the nonprofit controls the fundraiser and the messaging, and the proceeds flow directly to the nonprofit first (primarily to the benefit of the nonprofit), the exemption is likely to apply.  But if the for-profit entity runs its own sales campaign and, as a part of that campaign pledges to share some portion of the proceeds with a charity, it is likely the exemption will not apply.
 
The following are some best practices to employ when a for-profit company assists a non-profit entity in a fundraising campaign:
 
• Create a contract that expressly provides that the nonprofit has engaged the for-profit to sell products on the nonprofit’s behalf;
• Ensure every call begins with a statement that the call is made on behalf of the nonprofit or for the nonprofit;
• Ensure the nonprofit has control and the ultimate say over the content of the telemarketing script;
• Make sure all invoices to the customer come from the nonprofit directly, ensuring that a clear business and contractual relationship is formed between the customer and the nonprofit;
• Make sure funds are paid directly to the nonprofit;
• Allow for direct donations to the nonprofit in addition to, or instead of, purchase of the product.
7th Circuit holds that agency principles apply to junk-fax cases
Last week, the Seventh Circuit weighed in on the question of liability for a third-party’s junk-fax violations under the Telephone Consumer Protection Act in Bridgeview Health Care Ctr., Ltd. v. Clark. Holding that strict liability does not apply to advertisers on whose behalf junk faxes are sent, the court instead applied principles of agency analysis to determine that a small business utilizing a fax marketing company was not liable for faxes sent beyond the scope of the business’s instruction. Read more about this case here.
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