A bill to ban robocalls to mobile devices passed through committee and will be brought before the full chamber of the Massachusetts House of Representatives. The bill's scope is expansive and seeks to prohibit all robocalls, with limited exceptions such as for school districts, healthcare, and public utilities. The bill succinctly prohibits "all robocalls" "in the commonwealth to any hands-free mobile telephones, mobile electronic devices and mobile telephones." The bill defines "robocall" as an automated call that uses both a computerized autodialer and a computer-delivered pre-recorded message.
Importantly, the bill includes an enforcement provision that allows the state attorney general to obtain civil penalty of up to $10,000 for each knowing violation. The bill also includes a private right of action for individuals who have received more than one call within a 12-month period from the same entity and enables individuals to collect $10,000 per violation, including attorneys' fees and costs. These damages provisions are well in excess of what individuals can collect under the federal TCPA, where damages are $500 per violation or $1,500 per violation if willful.
The full text of the bill H.201 can be viewed here
Earlier this year, the D.C. Circuit issued a significant decision in a challenge to the July 10, 2015 Federal Communication Commission (FCC) Declaratory Ruling and Order. See our post on the decision for more information. The D.C. Circuit struck down the FCC’s interpretation of the TCPA’s definition of “automatic telephone dialing system” and the FCC’s rules for liability for calls to “reassigned” telephone numbers.
Now, the FCC is seeking comments on significant TCPA issues, including those at issue in the D.C. Circuit decision. The FCC is seeking public comment on the following questions:
1. What constitutes an “automatic telephone dialing system”?
2. How should reassigned wireless numbers be treated under the TCPA, including how to define “called party”
3. How may a called party revoke prior express consent to receive robocalls?
4. Are contractors acting on behalf of federal, state, and local governments are “persons” under the TCPA?
Comments are due to the FCC by June 13 and reply comments are due by June 28. The FCC public notice can be found here.
The Telephone Consumer Protection Act (TCPA) prohibits the use of automated telephone calls absent “prior express consent” from the called party. Obtaining “express consent” in the first instance is not overly challenging. In a 1992 Order, the FCC stated that “persons who knowingly release their phone numbers have in effect given their invitation or permission to be called at the number which they have given, absent instructions to the contrary.” In re Rules & Regulations Implementing the Telephone Consumer Protection Act of 1991, 7 F.C.C. Rcd. 8752, 8769 (Oct. 16, 1992). Since the 1992 Order, interpretations of “prior express consent” have narrowed slightly such that consent is effective only if it “relates to the same subject matter as is covered by the challenged calls or text messages.” Van Patten v. Vertical Fitness Group, LLC, 847 F.3d 1047, 1044-45 (9th Cir. 2017).
In the case of debtors and creditors, the FCC has interpreted “prior express consent” as being satisfied where the called party provides their wireless number in connection with an existing debt and the autodialed calls are made regarding that debt. The debtor need not have provided their number directly to the creditor; consent is satisfied if the creditor obtains the number from an intermediary. Moreover, the debtor does not have to provide the number for a particular purpose or specifically consent to autodialed calls. As long as the debtor consents to be called in connection with the debt, the “prior express consent” provision of the TCPA is satisfied. But, one may ask, is that consent eternal?
The TCPA is silent as to revocation of consent. However, a majority of courts have held that consumers may revoke their prior express consent. See, e.g., Van Patten, 847 F.3d at 1047; Gager v. Dell Financial Services, LLC, 727 F.3d 265 (3d Cir. 2013) (debtor could revoke consent under TCPA); Osorio v. State Farm Bank, F.S.B., 746 F.3d 1242 (11th Cir. 2014) (same). Most recently, in Ginwright v. Exeter Finance Corp., 280 F. Supp. 3d 674 (D. Md. 2017), the District of Maryland denied a creditor’s motion for summary judgment, finding that consent was revocable, and that the question of whether consent had been revoked was an issue of fact for the jury. Each of these courts—whether considering debtors or consumers in general—based their decision on three main ideas. First, revocable consent is consistent with the purpose of the TCPA. The TCPA is a remedial statute that was “passed to protect consumers,” and any silence or ambiguity should be construed in favor of consumers. Second, the common law concept of “consent” provides that it may be withdrawn. Because the TCPA does not define consent, the common law meaning is instructive. Third, the FCC has ruled that under the TCPA, a consumer may revoke consent “at any time and through any reasonable means.” In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991 (2015 Declaratory Ruling), 30 FCC Rcd. 7961, 7996 ¶ 62 (2015). Significantly, the D.C. Circuit recently upheld the FCC’s ruling with respect to revoking consent. ACA International v. FCC, 885 F.3d 687, 709 (D.C. Cir. 2018).
But concluding that consent is revocable is only half the battle. If consent is revocable, when is it effectively revoked? What are “reasonable means” for revoking consent? The FCC has said that consent may be revoked in “any manner that clearly expresses a desire not to receive further messages[.]” 30 FCC Rcd. 7961, 7996 ¶ 63 (2015). The recent decision in Ginwright is instructive. In that case, the plaintiff listed his phone number on a credit application as part of a car purchase. The application specifically provided consent to debt collection calls. But, after his loan became overdue, the plaintiff claimed that he expressly demanded, on five separate calls, that the creditor “stop calling [his] phone.” The court found that where loan servicing records reflected that the debtor did not give affirmative consent to being called on multiple occasions, there was at least some support for his contention, and that if “a factfinder were to determine that Ginwright had revoked his consent, he could succeed on his TCPA … claims.” On the other hand, the Ginwright court denied the plaintiff’s motion to certify a class, finding that issues of consent and revocation of consent would be too individualized to resolve on a class-wide basis.
By contrast, in Van Patten, the Ninth Circuit upheld the district court’s grant of summary judgment, finding that the consumer did not revoke his prior express consent. There, the consumer argued that he revoked his consent to be contacted by a gym when he cancelled his gym membership. The court explained that “[r]evocation of consent must be clearly made and express a desire not to be called or texted,” and “no evidence in the record suggest[ed] that [the consumer] told Defendants to cease contacting him on his cell phone.” In short, the gym was not required to infer that the plaintiff’s cancellation of his gym membership was also meant to revoke his consent to receiving calls or texts from the gym.
It is clear from these decisions that the revocation must be expressly made. The means by which that express revocation is given, however, remains unclear. In ACA International v. FCC, 885 F.3d 687 (D.C. Cir. 2018), the court upheld the FCC’s broad “any-reasonable-means” standard. This leaves consumers with a wide range of options to effectively revoke consent—and leaves a potentially narrow path to summary judgment on the issue.
For businesses seeking to afford themselves more clarity and predictability when it comes to revocation of consent, there is at least one strategy available. While a business may not unilaterally impose a specific procedure for revoking consent, a business may enter into a bilateral agreement with a customer that includes an agreed-upon mechanism for revoking consent. As the D.C. Circuit observed in ACA International, nothing in the FCC’s rules prevents parties from agreeing upon revocation procedures. Id. at 710.
With the ball in the consumer’s court when it comes to revocation, it appears that callers will face heightened exposure to TCPA liability. With this in mind, callers would be wise to heed the D.C. Circuit’s advice and avoid potential violations “by making available clearly-defined and easy-to-use opt-out methods” or by contractually agreeing to specific revocation procedures up front.
On April 14, the plaintiffs in Brinker v. Normandin’s, a California class action, got a second chance to pursue their TCPA claims against a car dealership and its advertiser. Though a ruling earlier this year dismissed the plaintiffs’ claims for lack of standing, the court reversed that decision based on a subsequent opinion from the Ninth Circuit.
The lawsuit, which alleged that the plaintiffs received unwanted automated telephone calls from defendants, did not allege any damages other than statutory damages under the TCPA. Based on the U.S. Supreme Court’s 2016 ruling in Spokeo v. Robins, which held that plaintiffs must allege a “concrete harm” to bring statutory privacy claims, the Northern District of California dismissed the plaintiffs’ action in February for lack of Article III standing.
The Brinker plaintiffs moved for reconsideration in light of the Ninth Circuit’s ruling in Van Patten v. Vertical Fitness Group, which was issued after briefing on their own motion had closed. The Van Patten court held that a plaintiff who allegedly received unwanted marketing texts without incurring any other financial damages did indeed suffer a concrete injury, establishing Article III standing.
The court agreed and changed its position according to the Van Patten holding, noting that their claims that defendants “placed unsolicited, automated calls to their phones in violation of the TCPA…are sufficient to show that the plaintiffs suffered a concrete injury” despite the fact that the only impact the plaintiffs alleged was that they felt annoyed and “harassed’ by the calls.
The court passed on addressing the defendants’ challenge that the named plaintiffs could not represent customers who received a different type of call than the ones that they themselves received. Defendants asserted that, while the proposed class encompassed customer recipients of eight different types of calls, the named plaintiffs all received only one of those eight categories, and thus could not represent other customers. Noting that such an argument was a question of class certification, not standing, the court refrained from ruling on the issue.
The potential exposure for the defendants in this action is considerable, as several plaintiffs allege that they received five or six unsolicited calls from an autodialer. The case is Brinker v. Normandin’s, Case No. 5:14-cv-03007, (N.D. Cal).
On Friday, March 31, the federal court of appeals for the D.C. Circuit shook up the world of Telephone Consumer Protection Act (TCPA) jurisprudence by holding that a Federal Communications Commission (FCC) rule announced in 2006 was incorrect, and exceeded the agency’s authority. While the decision has an immediate impact on the (albeit, rapidly narrowing) world of facsimile advertisements, many are eagerly wondering if it signals forthcoming decisions that will further narrow the threat of liability under the Act.
The case was titled Bais Yaakov of Spring Valley et al. v. Federal Communications Commission et al. The question before the D.C. Circuit concerned, at bottom, the FCC’s interpretation of the TCPA requirements for faxes sent by advertisers with the recipients’ previous consent. The TCPA allows for regulation of unsolicited faxes, permitting them only when 1) the sender and the recipient have an established business relationship, 2) the recipient’s fax number was obtained via its own public disclosure, and, of key importance here, 3) each fax contains an opt-out notice that complies with the statute’s requirements. The third requirement mandates that clear and conspicuous language offer the recipient a cost-free mechanism to request the cessation of any further messages. The penalty for non-compliance is strict: An individual or business can sue for at least $500 per violation of any of these provisions.
The FCC is authorized to issue regulations implementing the TCPA. In 2006, the FCC issued a rule applying the opt-out notice requirements not only to unsolicited faxes, but also to solicited faxes. This new “Solicited Fax Rule” has left many advertisers facing exorbitant penalties for sending a fax that, while the recipient had previously agreed to receive, did not strictly adhere to the opt-out notice requirements. Indeed, the petitioner in this case, a seller of generic drugs, was facing liability of $150 million for failing to include opt-out notices to its customers—customers who admitted they had expressly given the petitioner consent to send the faxes. The D.C. Circuit, pointing out the absurdity of such a situation with biting frankness, struck down the FCC’s rule.
First, the D.C. Circuit held that the Act’s “requirement that businesses include opt-out notices on unsolicited fax advertisements” does not grant the FCC authority to require the same notices on solicited faxes. The language of the Act focuses on, first, barring unsolicited advertisements from being sent over facsimile. Then, it presents the exceptions to that rule, one of which is a fax that (among other things) contains an opt-out notice. Nowhere, the court held, did the Act “require a similar opt-out notice on solicited fax advertisements.” Furthermore, it determined that no language in the Act itself grants the FCC authority to require opt-out notices on solicited fax advertisements.
Noting that it is not the Judiciary’s job to “redraw” the Act to place requirements on senders of solicited faxes, the court rejected the FCC’s position that it may create and enforce the Solicitation Rule “so long as Congress has not prohibited” it. The court found such a theory “backwards as a matter of basic separation of powers and administrative law.”
In addition, the court did not agree that the Solicited Fax Rule was allowable on the grounds that Congress has yet to define what actually constitutes “express permission” to send fax advertisements. It bluntly criticized the FCC’s reasoning that since “prior express permissions lasts only until it is revoked…all fax advertisements—even solicited fax advertisements—therefore must include a means to revoke that permission” as “difficult to follow.” Though the FCC can reasonably define the concept of “prior express invitation or permission” and may allow recipients to revoke such permission, the court opined, “what the FCC may not do under the statute is require opt-out notices on solicited faxes[.]” The case was remanded for further proceedings.
To fully grasp the unique nature of this decision, which may seem limited to a rather archaic form of communication, it is important to note how much FCC interpretation of the TCPA has guided its application over changing technology. FCC rulings in 2012 have been treated as amendments of the TCPA’s consent rules for fax, text, and telemarketing advertisements, and the 2015 FCC Declaratory Ruling and Order created an extremely broad and sweeping definition of an “autodialer” for TCPA purposes.
To the extent the court limits or reverses the FCC ruling by negating not only the substance of the rule but also the FCC’s authority to make it, this decision could be the harbinger of more change to come. In fact, the D.C. Circuit is currently considering another case, ACA International, that could have a significant impact on the rules governing calls and texts to customers. Among other things, the petitioners in that case have challenged the FCC’s very broad definition of “autodialer.” If the D.C. Circuit discards deference to the FCC’s interpretations of the statute, it could bring about a sea change in this area of the law.
 Case No. 14-1234, U.S. Court of Appeals for the District of Columbia Circuit.
 ACA International v. Federal Communications Commission et al., No. 15-1211, (D.C. Cir.).
During President Obama’s two terms, the Telephone Consumer Protection Act (TCPA) grew from an archaic and nearly forgotten relic of the early 1990’s 2G wireless era, to a muscular consumer protection juggernaut. The statute has become a favorite weapon for consumer class action lawyers, so much so that commentators have sardonically recast the statute’s acronym: “Total Cash for Plaintiff’s’ Attorneys.” But the winds of change are blowing: a Republican businessman sits in the White House, Congress remains firmly in Republican hands (for now), new Republican leadership has taken the helm at the Federal Communications Commission (FCC), and a business-friendly conservative has been appointed to fill the vacancy on the United States Supreme Court.
Trump’s commitment to deregulation
The election of 2016 may mark a pivot point with respect to the push and pull between consumers and businesses. An early centerpiece of President Trump’s agenda is rolling back what he deems to be government overreach. He has promised to revive the economy by removing regulatory impediments to business success and growth. While initial efforts have focused on immigration and health care reform, a rollback of broader consumer protections appears to be underway.
Only two weeks following his inauguration, President Trump signed the Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs. Among other things, that order mandates that federal agencies must cut two regulations for every new one they wish to create. Less than a month later, he went a step further with the Presidential Executive Order on Enforcing the Regulatory Reform Agenda, which directs federal agencies to create task forces to identify burdensome regulations so that they can be brought to the chopping block.
President Trump’s outline for his proposed 2018 budget includes deep cuts to several federal departments and agencies known for their strict regulatory regimes aimed at protecting individuals against business interests, including the EPA and the Departments of Labor, Health and Human Services, and Housing and Urban Development.
More recently, in March of this year, President Trump signed an executive order rolling back President Obama’s regulatory efforts to slow climate change through restrictions on power plant emissions. Meanwhile, Republicans in Congress voted to repeal landmark internet privacy protections. The new legislation, which President Trump is expected to sign, overrules nascent FCC rules that were intended to protect the privacy of internet users. If the repeal becomes law, internet service providers will be able to sell browsing history to businesses without consumer consent.
It is likely these initial steps are only the beginning. At a White House signing ceremony on March 27, 2017, at which President Trump signed legislation rolling back some other Obama-era regulations, the president stated his intentions bluntly: “I will keep working with Congress, with every agency and most importantly, the American people, until we eliminate every unnecessary, harmful and job-killing regulation that we can find. . . . We have a lot more coming.”
While TCPA reform has not yet been specifically mentioned as a Trump priority, it seems likely that the president and his political allies see the statute and the FCC’s rules as a governmental overreach that has created an undue burden on business. Indeed, given that Donald Trump’s campaign was itself sued for TCPA violations in 2016, it stands to reason that the new president is no fan of the statute.
The growth of the TCPA makes it a likely Trump target
The TCPA, enacted in 1991, is a federal statute created to protect consumers from overzealous telemarketers using invasive mass telemarketing practices, such as “autodialers” (technology that stores and dials huge lists of phone numbers randomly or sequentially) and artificial or prerecorded voices (so called, “robocalls”).
Many of the issues that first prompted passage of the TCPA have, however, been ameliorated through smarter technologies and a shift away from mass marketing strategies. Notwithstanding these advances, FCC and court rulings have interpreted the TCPA in an increasingly expansive way. These rulings, coupled with the lure of uncapped statutory damages (as much as $1,500 for each call in violation), have encouraged consumer lawyers to file more and more TCPA claims. Class actions that can aggregate the claims of thousands of consumers can potentially be worth hundreds of millions of dollars—a tempting enticement for class action lawyers who ordinarily take home a percentage of that recovery.
The result has been an explosion of TCPA litigation. According to litigation analyst WebRecon LLC, only 16 plaintiffs nationwide filed TCPA claims in federal court in 2008. That number climbed to 1,136 plaintiffs in 2012. Steady increases continued each year of Obama’s presidency, topping out at 4,860 TCPA claims in federal court by 2016. Because the TCPA is a strict liability statute and violations are relatively easy to prove, businesses facing potentially ruinous class action liability have been quick to settle claims with substantial payouts. For example, in just the past few years, Capital One settled a TCPA class action for $75 million, several cruise lines settled claims for $76 million, and AT&T and Bank of America settled cases for $45 million and $32 million, respectively.
Thus, the biggest factor driving increased TCPA litigation is most likely the lure of easy money for lawyers, rather than an increase in vexatious telemarketing practices. Not surprisingly, the business community has taken notice and has been lobbying the FCC and Congress to scale back the reach and impact of the TCPA. While those efforts have been largely unsuccessful, the landscape has shifted.
Looking ahead: likely challenges and efforts to reform the TCPA
The FCC implements the TCPA through its rulemaking and assists the courts in interpreting the TCPA through its rulings. But the FCC’s most recent rulings have only added fuel to the fire of TCPA litigation. The FCC’s 2015 Omnibus Declaratory Ruling and Order (FCC Order) further expanded the sweep and scope of the TCPA. Most significantly, it expanded the definition of “automatic telephone dialing system” (i.e., autodialer) to such an extent that the TCPA now arguably applies to nearly any modern telecommunications device (including smart phones). The FCC Order also included several other rulings and clarifications that generally favored consumer interests over business interests. These rulings spurred a court challenge, which led to oral arguments before the D.C. Circuit in October 2016. Many of the questions at oral argument indicated skepticism of the FCC’s interpretation of the TCPA, particularly the FCC’s broad definition of an “autodialer,” and hinted that the court may send the FCC back to the drawing board. That decision remains pending.
Regardless of how the D.C. Circuit rules, the FCC may take a fresh look at the TCPA on its own initiative. The FCC Order was implemented under the former chairman of the FCC, Tom Wheeler, a Democrat appointed by President Obama. Chairman Wheeler stepped down in January of this year and President Trump immediately elevated Republican Commissioner Ajit Pai to the chairman position. Due to one other recent departure by a Democrat, the FCC, which is ordinarily directed by five commissioners, currently has two Republican commissioners to just one Democrat. With a Republican president making future appointments, the FCC will remain in Republican hands for at least four years.
Pai’s appointment as the FCC Chairman is significant. In 2015, Commissioner Pai vigorously dissented from two of the more controversial aspects of the FCC Order, harshly criticizing the FCC’s interpretation of the TCPA. Pai believed the FCC Order dramatically expanded the TCPA’s reach, which he wrote was “sure to spark endless litigation, to the detriment of consumers and legitimate businesses that want to communicate with them.” Speaking of the abuses he saw in TCPA litigation, Pai observed that “in practice the TCPA has strayed far from its original purpose. And the FCC has the power to fix that.”
Since taking over as chairman, Pai has not yet publicly addressed the TCPA or any plans to curtail its reach, focusing his initial efforts in other areas. For example, Pai moved aggressively to roll back Obama-era consumer protection regulations designed to ensure equal access to the internet (so called “net neutrality” rules). But Pai’s sympathetic stance toward business interests, coupled with his 2015 dissent, strongly suggest that he will take steps to reform the FCC’s approach to the TCPA. Nevertheless, while Chairman Pai will bring a new perspective to the TCPA, he is unlikely to seek its wholesale destruction. Rather, Pai’s previous comments suggest he will seek to reform the regulations so that plaintiffs will be incentivized “to go after the illegal telemarketers, the over-the-phone scam artists and the foreign fraudsters[,]” rather than “legitimate, domestic businesses.”
Indeed, reforming the TCPA is not a zero sum game, nor is it necessarily a partisan issue. Both Democrats and Republicans have constituents who resent invasive telemarketing. In recent years, there has been legislative activity in Congress both to strengthen the TCPA’s consumer protections and to reign in its excesses. Currently before Congress is the Help Americans Never Get Unwanted Phone Calls (HANGUP) Act. While HANGUP was authored by Massachusetts Democratic Senator Ed Markey, Republican Senator Michael S. Lee co-sponsored the bill. The bill strikes a provision of the Budget Act of 2015 that exempts from TCPA liability callers collecting debt owed or guaranteed by the federal government. The HANGUP bill illustrates that Democrats and Republicans may be able to work together to reform the TCPA so that it works for both consumers and legitimate businesses.
Although not directly addressed by the TCPA, a bill quietly introduced in February—the Fairness in Class Action Litigation Act of 2017—may have the greatest impact on TCPA litigation. Should this bill become law, it will enact wide-ranging changes to the procedural rules governing class and multi-district litigation. While the rule changes may seem technical and abstract to most lay observers, the practical results could be significant. In short, the various proposed revisions would make it much harder for plaintiffs’ lawyers to certify a class in federal court. Defense attorneys would be given a slew of new tools to defeat class certification, which would incentivize defendants to fight rather than settle and may discourage the filing of borderline suits. President Trump could be expected to sign the bill, which has already passed the House and is currently under consideration in the Senate.
Finally, to the extent that any matters bearing on the TCPA, or the FCC’s authority to enforce it, end up before the Supreme Court, Justice Scalia’s successor may prove critical. The current unconfirmed appointee, Tenth Circuit Judge Neil Gorsuch, is an originalist in the tradition of his predecessor. His conservative judicial philosophy has caused him to rule in favor of business interests more often than individuals. In fact, commentators have remarked that Judge Gorsuch “has not hesitated to take stands that critics say have a partisan edge,” including by criticizing judicial activism and calling for “limiting the power of federal regulators.”
Limiting the power of regulators is exactly what Judge Gorsuch proposed in a concurring opinion in Gutierrez-Brizuela v. Lynch, 834 F.3d 1142 (10th Cir. 2016). In the opinion, Judge Gorsuch challenged the doctrine that compels courts to defer to the rulings of federal agencies in certain circumstances—so called “Chevron deference.” Judge Gorsuch criticized the doctrine for allowing “executive bureaucracies to swallow huge amounts of core judicial and legislative power” and for “concentrat[ing] federal power in a way that seems more than a little difficult to square with the Constitution of the framers’ design.” In sum, his opinion strongly suggested that the time had come to discard deference to regulators. With ACA International currently pending before the D.C. Circuit Court of Appeals, Judge Gorsuch’s skeptical stance regarding federal regulators, such as the FCC, might prove decisive.
The Trump presidency is still in its infancy and the fate of the TCPA has yet to be discussed. But the tea leaves indicate that the TCPA is likely to get caught up as part of the new administration’s broad-based effort to deregulate. President Trump’s appointees to the FCC and the Supreme Court appear to have ideologies and philosophies that align with these goals. The precise contours of the changes that are coming remain to be seen. But interested businesses and individuals should stay tuned as TCPA reform appears inevitable.
 Adonis Hoffman, "Does TCPA stand for ‘total cash for plaintiffs’ attorneys’?", THE HILL (Feb. 17, 2016).
 Trump signs legislation rolling back Obama-era regulations, U.S. News & World Report, Mar. 27, 2017.
 See our previous article about the Trump campaign TCPA lawsuit here
 See 2016 Year in Review: FDCPA Down, FCRA & TCPA Up, WEBRECON LLC (Jan. 24, 2017), available here
 See our two prior alerts discussing the FCC Declaratory Ruling, Part 1 here
and Part 2 here
 ACA International v. FCC
, 15-1211, (D.C. Cir. filed July 10, 2015).
 For more complete commentary on ACA International v. FCC,
15-1211 please see our coverage here
 The president has the power to appoint commissioners, with confirmation by the United States Senate, to five-year terms. While only three commissioners may be members of the same political party, three is sufficient to constitute a majority.
 In re Rules & Regulations Implementing the TCP Act of 1991 et al.,
30 FCC Rcd 7961 (F.C.C. July 10, 2015).
 For more detail on the specific rule changes in the Act, please see our prior alert here
 Adam Liptak, "In Judge Neil Gorsuch, an Echo of Scalia in Philosophy and Style," N.Y. TIMES, Jan. 31, 2017.
On January 30, 2017, the U.S. Court of Appeals for the Ninth Circuit held that promotional text messages sent by a gym franchise to a former member constituted a concrete injury, under the Telephone Consumer Protection Act (TCPA), for standing purposes. The ruling provides important guidance on Article III standing following the Supreme Court’s ruling last year in Spokeo, Inc. v. Robbins. While post-Spokeo rulings continue to differ from one case to the next, the Ninth Circuit takes a clear position that the invasion of privacy concerns, underlying the TCPA, mean that nearly any unwanted call, or text, sent in violation of the TCPA can constitute a “concrete” injury conferring standing to sue, even when the plaintiff does not suffer any actual financial harm. But the Ninth Circuit went on to affirm the dismissal of the certified class action because the lead plaintiff had consented to receive the texts, and he had never revoked that consent, even when he cancelled his gym membership.
The plaintiff in Van Patten v. Vertical Fitness Group, LLC, No. 14-55980 (9th Cir.), perhaps in anticipation of beach season, visited a Wisconsin Gold’s Gym franchise in March of 2009. He filled out a visitor card, listed his cell phone number, and then met with the gym’s manager and signed a membership agreement. The agreement contained the cell phone number that the plaintiff had provided. However, like many of us, the plaintiff had second thoughts days later and cancelled his membership during the grace period. He later moved to California.
Three years later, the gym franchise parted ways with Gold’s Gym and went through a rebranding process. The gym owners contracted with a marketing company to announce the gym’s new name (importantly, the actual ownership of the business remained the same). Plaintiff received two texts containing offers to rejoin the rebranded gym at a discount and enter a contest for a prize. Plaintiff declined these offers, and instead filed a class action against the gym and the marketing company. He alleged violations of the TCPA and California consumer protection statutes governing text communications with consumers. The district court ultimately certified the plaintiff’s class, but later granted the defendants’ motion for summary judgment.
The Ninth Circuit affirmed the lower court’s grant of summary judgment, despite the fact that a class had already been approved. But before the Ninth Circuit issued its decision, the Supreme Court of the United States issued the long awaited ruling in Spokeo, underscoring that “Article III standing requires a concrete injury even in the context of a statutory violation,” and that a plaintiff does not “automatically satisf[y] the injury-in-fact requirement” merely because a statute barring any given behavior is violated. Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1549 (2016). While Spokeo reaffirmed the necessity of a showing of “concrete harm” in federal cases, it did not definitively settle the Article III standing confusion in the lower courts. In this case, the Ninth Circuit was still left to decide whether an unsolicited text message, by itself, could constitute a “concrete injury.” The Ninth Circuit agreed with the plaintiff that it could.
Reviewing the history and purpose of the TCPA, the Ninth Circuit first recognized that, “Congress identified unsolicited contact as a concrete harm, and gave consumers a means to redress this harm.” VanPatten. Slip Op. at 10.The court noted that, unlike the alleged harm at issue in Spokeo (the misreporting of innocuous information in violation of the Fair Credit Reporting Act that arguably caused no harm to anyone), unwanted text messages by definition cause at least a minor invasion of privacy. As the court put it, “unsolicited telemarketing phone calls or text messages, by their nature, invade the privacy and disturb the solitude of their recipients.” Such unwanted invasions “present the precise harm and infringe the same privacy interests Congress sought to protect in enacting the TCPA.” Id. at 11. Thus, a plaintiff alleging a violation of the TCPA need not allege any additional harm to have standing to assert his claim. Id.
The court reached a contrary result with regard to the plaintiff’s California claims. Under California’s Unfair Competition Law and/or False Advertising Law, plaintiffs are required to “establish a loss or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and . . . show that that economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is the gravamen of the claim.” Id. at 21-22. Thus, a mere intangible invasion of privacy is not sufficient to establish harm under the California statutes. The Ninth Circuit agreed with the district court that the plaintiff had not come forth with any evidence to prove he had suffered any actual economic harm, and therefore the plaintiff lacked standing to bring the state law claims.
The court’s inquiry did not end with standing. Next the court examined whether the defendants could defeat the named plaintiff’s claim with the defense that he had actually given the gym express consent to contact him via text message. Completely negating the plaintiff’s claim, the court held first that the provision of the plaintiff’s phone number when he filled out the membership card constituted “prior express consent” to receive texts from his gym. Adopting the reasoning used by the FCC in 2014, the court acknowledged that while provision of a cell phone number to a business does not constitute permission for that business to contact the customer about any and all topics, “transactional context matters in determining the scope of a consumer’s consent to contact”. Id. at 13. The court held that while providing one’s phone number to a gym in a membership application does not constitute consent to receive texts on any and all topics, it does constitute consent to receive text communications about membership opportunities. Id. at 13.
Next, the court held that since the lead plaintiff never expressly revoked his consent to receive such text messages, the defendants’ invitation to return three years after cancelling his membership was still within permissible bounds, under the TCPA. In reaching this decision, the Ninth Circuit acknowledged that the TCPA is not as clear as many would hope with respect to whether a party may revoke consent to be contacted, and is nearly silent as to what constitutes such revocation. Id. at 19.
Following FCC guidance issued in 2015, the court held that “consumers have a right to revoke consent, using any reasonable method including orally or in writing.” Id. at 19. The court held that the plaintiff, in this instance, did no such thing and rejected the plaintiff’s argument that cancelling the gym membership effectively revoked the gym’s authorization to call or text him at the number he had provided. The court ruled that because the plaintiff “did not clearly express his desire not to receive further text messages, he did not revoke his consent.” Id. at 20. Thus, while other recipients of the gym’s texts might have claims, the lead plaintiff in this case did not, and dismissal of the action was required.
The ruling in this case is significant for two reasons. First, it is one of the first rulings from a court of appeals on an Article III challenge post-Spokeo. It clarifies that an unwanted text solicitation confers standing, regardless of whether or not the recipient sustained a tangible harm, such as a loss of minutes, a higher cell phone bill, or another more individualized showing. This aspect of the ruling is a victory for consumer advocates. Defense attorneys have already complained that the Ninth Circuit’s ruling sets the standing bar too low by establishing a bright line test that will be extraordinarily easy for any TCPA plaintiff to meet.Nonetheless, consumer-facing businesses can take heart in the second portion of the opinion, focusing on consent and what is required to revoke consent. The court defined a broad scope for what constitutes a consumer’s consent-to-contact. Any message that is sent to the consumer “in connection with” the reason the phone number was originally provided to the business is fair game. Additionally, the dismissal of the plaintiff’s claim underscores that merely leaving a gym, cancelling a library card, or ceasing to be a customer is not enough to put the business on notice that the customer has withdrawn consent-to-contact. Some type of further express communication is required to revoke consent. What constitutes sufficient express communication will remain to be seen as this area of law develops. Bottom line, consumer-facing businesses should carefully monitor any and all avenues by which customers may attempt to revoke consent. Reply texts that simply say “stop”, or verbal pleas to “stop calling me,” may be enough even if the customer does not follow a formalized “opt out” procedure. Indeed, while the TCPA requires that telemarketing calls and texts must provide a mechanism to allow consumers to quickly and easily “opt out” of receiving such calls and texts, the FCC continues to reiterate that consent may be revoked by “any reasonable means.” Moreover, businesses cannot limit the means for revoking consent by contract.
In a report and recommendation issued in the U.S. District Court for the Eastern District of Michigan, a Magistrate Judge found that LiveVox, Inc.’s HCI (Human Call Initiator) dialing system is not an autodialer subject to the Telephone Consumer Protection Act (“TCPA”). The Magistrate Judge recommended that the Court grant partial summary judgment dismissing some of the plaintiff’s claims against Stellar Recovery, Inc., a debt collector hired by Comcast Corporation to collect on past due bills.
The plaintiff in Smith v. Stellar Recovery, Inc., et al., No. 15 cv-11717-SJM-MKM (E.D. Mich.), sued Comcast and Stellar alleging that the companies violated the TCPA, state privacy laws, and the Fair Debt Collection Practices Act. The plaintiff claims that Stellar used an autodialer to knowingly and willfully call her cell phone 53 times regarding a debt owed to Comcast despite the fact that she had not consented to such calls and she had filed for Chapter 7 bankruptcy. The TCPA prohibits companies from using an autodialer to call consumers on their cell phones, unless the consumer has provided prior express consent to receive such calls. Stellar conceded that some of the calls were made using an autodialer system—the RPC (Right Party Connect) system. Stellar argued that the bulk of the calls, however, were made using LiveVox’s HCI system, which Stellar argues is not an autodialer.
Under the TCPA definitions, an “automatic telephone dialing system” (or “autodialer”) is “equipment which has the capacity—(A) to store or produce telephone numbers to be called using a random or sequential number generator; and (B) to dial such numbers.” 47 U.S.C. § 227(a)(1). In prior rulings and orders, the Federal Communications Commission (“FCC”) has emphasized that the “basic function” of an autodialer is the “capacity” to dial phone numbers “without human intervention.” In re Rules & Regs. Implementing the TCPA of 1991, 30 F.C.C.R. 7961, 7973 (FCC July 10, 2015) (“TCPA Order”). Nevertheless, the FCC has emphasized a broad interpretation of the word “capacity.” Autodialers need only have the “capacity” to automatically dial numbers generated randomly or sequentially, they need not have the “present ability” to do so. Id. at 7972-74. The FCC has also previously ruled that “predictive dialers” fall within the meaning of the statutory definition of an autodialer. Id.
The Magistrate Judge reviewed and contrasted to the two dialing systems that Stellar used. Both LiveVox systems are cloud based systems that are accessed by clients, like Stellar, through a web portal. For both systems, managers at Stellar create “campaigns”—groups of phone numbers to be called that are then “scrubbed” by placing certain restrictions on dialing based on legal considerations, such as local law where the debtor resides. With the RPC system, the campaign is then initiated by a Stellar manager simply clicking “play.” From that point on, the LiveVox system automatically dials the numbers in the campaign and uses a “predictive functionality,” meaning that it times the dialing of each call based on predictions regarding when a live operator or agent will likely be available to handle the call. When a live person answers the phone on the other end, the software automatically transfers the call to the next available agent.
The HCI system is less automated. When the Stellar manager clicks “play,” LiveVox does not begin dialing numbers. Instead, it presents telephone numbers to “clicker agents,” who must select and confirm each individual telephone number—by pointing and clicking—before LiveVox will place the call. “Closer agents,” who handle the calls when a live person answers, must sit and wait for calls to connect before a call is transferred to them. Thus, the HCI system does not have the same predictive functionality. Moreover, unlike with the RPC system, the clicker agent controls, on an individual basis, when each call is made.
The Magistrate Judge concluded that the HCI system is not an autodialer because the system cannot dial numbers without human intervention—the participation of the clicker agents who initiate each phone call. In other words, while the system employs sophisticated technology, it is not automated because a human must initiate each call, one call at a time. The Magistrate Judge rejected the plaintiff’s argument that because the FCC construes the term “capacity” very broadly, the Court should rule that the HCI system has the potential future capacity to be altered to function like an autodialer. The Magistrate Judge relied on LiveVox’s product management director, who testified that the HCI system includes both software and hardware components, none of which are shared with the RPC system or any other autodialing system. Plaintiff did not present any proof that the HCI system could tap into any autodialing system or otherwise be reconfigured to operate as an autodialer.
Finally, the Magistrate Judge pointed to authority from other districts. In Pozo v. Stellar Recovery Collection Agency, Inc. No. 15-cv-929-T-AEP, 2016 WL 7851415 (M.D. Fla. Sept. 2, 2016), the Middle District of Florida also ruled that LiveVox’s HCI system is not an autodialer. Moreover, several other courts have upheld the use of similar “point and click” dialing systems. For example, in Strauss v. CBE Group, Inc., 173 F. Supp. 3d 1302 (S.D. Fla. 2016), the Southern District of Florida upheld the use of a system that was configured in a way that required the calling agent to manually initiate each call by clicking a computer mouse or pressing a keypad.
The Magistrate Judge’s careful analysis and comparison of two different dialing systems provides a helpful explanation of what does and does not constitute an autodialer for purposes of the TCPA. The ruling is also good news for vendors who have endeavored to create modern dialing systems that comply with the TCPA.
Last month, the Third Circuit affirmed a decision by the Eastern District of Pennsylvania that a law firm's Commercial General Liability insurance policy, which covered “property damage” and “advertising injury,” did not extend to claims brought by a class of consumers looking to recoup their damages stemming from a law firm’s violation of the Telephone Consumer Protection Act (“the TCPA”). In Auto-Owners Insurance Company v. Stevens & Ricci, Inc., the appellate court held that the district court correctly exercised diversity jurisdiction over the declaratory judgment action brought by the plaintiff insurance company, and that its grant of summary judgment, in which it held that the insurance company was not responsible for paying the TCPA plaintiffs pursuant to an insurance policy, was also correct.
Previous to the lawsuit’s filing, a putative class sued the law firm of Stevens & Ricci, Inc. (“Stevens & Ricci”) for sending them unsolicited faxes in violation of the TCPA. The class plaintiffs alleged that more than 39 consumers had received such offending faxes during 2016. Stevens & Ricci alerted the issuer of its business owners insurance policy, Auto-Owners Insurance Company (“Auto-Owners”), seeking coverage for defense of the action, as well as any damages resulting from a finding of liability. The class plaintiffs, Stevens & Ricci, and Auto-Owners reached a settlement agreement under which the parties agreed to entry of judgment in favor of the class, with a specific finding that Stevens & Ricci did not willingly or knowingly violate the TCPA. Also, as a part of the settlement agreement, the class plaintiffs agreed to seek payment of $2 million only from Auto-Owners. The gamble was this: Auto-Owners had already filed a lawsuit for declaratory judgment seeking a ruling that the class plaintiffs’ claims fell within policy coverage. Thus, Stevens & Ricci tendered defense of that action to the class plaintiffs to stand in its shoes in the lawsuit.
The district court found in favor of Auto-Owners on its motion for summary judgment, and the class plaintiffs appealed. Before the Third Circuit were two questions—first, did federal court jurisdiction exist over the dispute, and secondly, had the issue of coverage been decided correctly? With respect to the first question, the class plaintiffs argued that the district court had wrongfully exercised diversity jurisdiction over the dispute because, though complete diversity existed between the parties, the jurisdictional limit of $75,000 had not been met. The class plaintiffs argued that the value of each of their claims was statutorily capped at $500 per occurrence, which had to each be regarded as a separate amount in controversy per class plaintiff under the anti-aggregation rule.
The Third Circuit rejected this argument, as the controversy in question before it was the determination of 39 claims for $500 each, but one claim by an insured against its insurer for the potential exposure of the underlying TCPA lawsuit. This number was determined by examining, not the $2 million settlement, but the potential exposure Auto-Insurers anticipated at the time the operative complaint in the declaratory judgment action was filed. The court held that this number was reasonably above the $75,000 limit—the class plaintiffs alleged that their ranks were “more than” 40 fax recipients. It would only take eleven more plaintiffs than the more than 40 alleged to reach the damage threshold of $75,000, as the class plaintiffs had asserted that treble damages should be added to the statutory award of $500 per class plaintiff. Furthermore, Stevens & Ricci had sought costs of defending the action from Auto-Insurers as well, which put the potential amount reasonably above the $75,000 threshold.
Next, the Third Circuit addressed whether the class plaintiffs would be able to recoup the $2 million they sought from Auto-Insurers. Applying Pennsylvania law, the court observed that Auto-Insurer’s policy covered “property damage,” defined as “[p]hysical injury to tangible property, including all resulting loss of use of that property” stemming from an “accident.” The court held that the TCPA property damage alleged (wasted paper, toner, ink) was not accidental—though the violation of the law may not have been intentional, “[t]hose injuries are the natural and expected result of the intentional sending of faxes, a far cry from Pennsylvania’s definition of an ‘accident.’” Thus the property damage coverage did not apply.
Nor were the class plaintiffs’ claims covered by the “advertising injury” coverage outlined in the policy. The policy defined advertising injury as, among other things, “[o]ral or written publication of material that violates a person’s right of privacy.” The class plaintiffs urged that, as TCPA violations are a violation of privacy through the sending of unwanted faxes, this clause covered their injury. The Third Circuit disagreed, holding that the right to privacy can be broken down into two broad categories: the privacy interest in secrecy and the privacy interest in seclusion. In other words, the right to keep one’s confidential information confidential is one right to privacy, which is separate and apart from the right to be left alone. The TCPA, the court held, only protects the secrecy-based private right, not the seclusion-based right that this lawsuit alleged had been violated. Noting that “read in context, the Policy provides coverage only for violations of the privacy interest in secrecy, and thus does not cover violations of a right to seclusion” and that none of the allegations in the underlying TCPA suit related to the content of the faxed advertisements, the court held the advertising injury clause did not provide coverage for the class claims.
This decision, which was reaffirmed a few weeks later by the denial for a motion for rehearing, has important implications for business owners hoping that their insurance policies will shield them from TCPA liability. Unless they enter into policies that have specific riders carefully designed to cover unintentional violations of the TCPA and similar statutes, they must beware that standard commercial general liability policies are unlikely to cover damages incurred in TCPA lawsuits.
The TCPA prohibits the “use [of] any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement. . . .” 47 U.S.C. § 227(b)(1)(C). The TCPA provides penalties in the form of statutory damages in the amount of $500 per fax. 47 U.S.C. § 227(b)(3)(B). Additionally, if it can be proven the defendant violated the TCPA “willfully or knowingly,” treble damages are permitted. 47 U.S.C. § 227(b)(3).
 No. 15-2080, 2016 U.S. App. LEXIS 16182 (3d Cir. Sept. 1, 2016).
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 Id. at *4.
 Id. at *7.
 Id. at *7-8.
 Id. at *11.
 Id. at *14.
 Id. at *30.
 Id. at *43.
 Id. at *48.
 Id. at *49.
 No. 15-2080, (3d. Cir. Sept. 30, 2016).
On July 27, 2016, a district court in the Eastern District of Arkansas stated that it was unconstitutional to restrict the use of automated or prerecorded telephone calls for political campaign purposes because any regulation doing so is “a content-based restriction that does not survive strict scrutiny.”
In the case Gresham v. Rutledge, plaintiffs, political consultants Conquest Communications Group and Victor Gresham, brought an action against the Attorney General of the State of Arkansas, alleging Arkansas Code Annotated § 5-63-204(a)(1), a state statute banning the use of automated phone systems for political campaigns, was unconstitutional. The statute prevented the consultants from making automated and prerecorded calls in Arkansas on behalf of their political clients, thus chilling free speech.
The Court agreed with Gresham and Conquest stating that the statute in fact did restrict political speech which is protected by the First Amendment. Because the statute is a content-based restriction on speech, it is subject to review under the strict scrutiny standard. In order to withstand strict scrutiny, the State had to prove that the statute advances a compelling state interest and further, that it is narrowly tailored to serve that interest.
The State centered their argument on Arkansas’ compelling interest in furthering residential privacy and public safety. While the Court noted the importance of residential privacy and public safety, it did not find it to be compelling. Regardless, the Court found the statute was not sufficiently narrowly tailored to survive the strict scrutiny test. During its analysis, the Court noted that the statute was too narrow in that it only restricted automated or prerecorded calls in connection with a political campaign or for commercial purposes, without any explanation as to why automated calls outside of those categories did not violate residential privacy. Additionally, the Court found that there were less restrictive alternatives to achieve the State’s interests in residential privacy, as evidenced by other states’ use of time-of-day restrictions, do-not-call lists, prohibitions on calling emergency lines, and disconnection requirements.
The case is Gresham v. Rutledge, Case No. 16-cv-241, District Court for the Eastern District of Arkansas.