Recognizing the failure of the TCPA to curb the growth of unsolicited robocalls, Senators in November proposed two separate bills—the REAL PEACE Act and the TRACED Act–which both aim to give regulators more power to stop robocallers.
Democratic Senators Diane Feinstein (California), Richard Blumenthal, (Connecticut), and Amy Klobuchar, (Minnesota), introduced the Robocall Elimination at Last Protecting Every American Consumer’s Ears (“REAL PEACE”) Act, which would end the common carrier exemption that prevents the Federal Trade Commission (“FTC”) from regulating common carriers. The common carrier exemption was originally put in place because common carriers were heavily regulated by other agencies, including the Federal Communications Commission (“FCC”). In light of those regulations, the FTC Act’s catch-all protection against “unfair or deceptive acts or practices” was unnecessary. But as the regulations governing common carriers have been rolled back in recent years, criticism of the common carrier exemption has grown.
Removing the common carrier exemption would allow the FTC to go after the truly bad actors—the scammers and fraudsters who send mass robocalls to unsuspecting consumers and hide their true identity by “spoofing” their calls.
According to a press release issued by Senator Feinstein’s office on November 28, 2018, “[t]echnology advances have helped robocallers hide their true identity and location, making it easier for them to relentlessly target and harass Americans. Our bill will close an FTC loophole so we can finally put illegal robocallers out of business.” The press release estimates that illegal robocalls cost Americans up to $9.5 billion a year.
But wait, there’s more. A bi-partison collaboration called the Telephone Robocall Abuse Criminal Enforcement and Deterrence (TRACED) Act, also targets robocallers—in particular the worst offenders who purposely violate telemarketing rules—by giving regulators more power to go after them and punish them.
The bi-partison TRACED Act, which is sponsored by Republican South Dakota Senator John Thune and Democratic Massachusetts Senator Ed Markey, would, among other things require all service providers to adopt call authentication and call blocking technology. It would also broaden the FCC’s authority to levy civil penalties of up to $10,000 per call and would extend the window of time for the FCC to bring civil enforcement actions against violators, extending the statute of limitations from one year to three years.
In a November 16, 2018 press release, Senator Thune’s remarks underscored how the new law would target the worst offenders, the scammers, and the intentional violators. “The TRACED Act targets robocall scams and other intentional violations of telemarketing laws so that when authorities do catch violators, they can be held accountable,” said Senator Thune. “Existing civil penalty rules were designed to impose penalties on lawful telemarketers who make mistakes. This enforcement regime is totally inadequate for scam artists and we need do more to separate enforcement of carelessness and other mistakes from more sinister actors.”
We will continue to track this legislation and will provide updates as it progresses.
On September 20, 2018, the U.S. Court of Appeals for the Ninth Circuit handed down a decision broadly construing the term “automatic telephone dialing system” in the Telephone Consumer Privacy Act (“TCPA”). Marks v. Crunch Fitness, Docket No. 14-56834. The court’s decision expands the coverage of the TCPA to modern direct marketing systems that contact customers through tailored—as opposed to random—telephone and text messages. The opinion is the latest in a series of court opinions and administrative rulemakings that have wrestled with the question of how to apply the TCPA to technological advances.
Confusion has reigned as to the scope of the TCPA both because the definition of automatic telephone dialing system (“ATDS”) is poorly worded, and because marketing communication technology has continued to evolve since the Act was passed in 1991. The Act provides that
(1) The term “automatic telephone dialing system” means 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.
Businesses are generally forbidden from making calls using an ATDS, particularly telemarketing calls and calls to mobile phones, unless they previously obtained the appropriate level of consent from the recipient of the call.
Marks sued Crunch Fitness (“Crunch”) when it sent him three text messages after he joined the gym in 2012. The district court granted Crunch’s motion for summary judgment on the basis that its “Textmunication” web-based marketing and communication system did not constitute an ATDS. First, the system did not use “random” or “sequentially-generated” numbers. The numbers that the system used to send texts were either hand-entered by Crunch employees, submitted by the customers themselves through registration on the Crunch website, or gleaned from text messages sent to Crunch by potential customers. Second, the system did not send messages “automatically.” A Crunch employee had to operate the system by selecting a number or subset of numbers and drafting a message to those members, then directing the system to send the message. Some messages, like those offering special promotions, presumably went to a broad audience while others, such as appointment reminders or birthday greetings, were more tailored.
In reviewing the lower court’s summary judgment ruling, the Ninth Circuit confronted an extensive history of regulatory rulemaking and declaratory orders. Marketing technology has evolved from fax or phone call blasts sent to massive lists of truly random numbers to more targeted systems, and the FCC has tried to keep up by refining the definition of what counts as an ATDS. In 2003, it adopted a rule that equipment with the “capacity” to dial “random and sequential” numbers would constitute an ATDS even if it was not being used that way at the time. In its 2015 Declaratory Ruling and Order, the FCC clarified that the term “capacity” meant that it is sufficient that the equipment have the “potential to be configured” to dial numbers randomly or sequentially even when the equipment is not presently configured to do so. Under that definition, a system that dials from a stored list of numbers, like the Textmunication system, can still constitute an ATDS. Finally, the court noted that, at the time of the 2015 rulemaking, the FCC was asked to clarify what exactly the statute meant by “automatic” dialing. Did it mean a system that operated entirely without human intervention? The court noted that the FCC did not clarify that point in its 2015 Declaratory Ruling.
However, as the Ninth Circuit observed, none of the FCC’s prior rulings was controlling in the Marks case because, in June 2018, the D.C. Circuit struck down both the 2003 and 2015 FCC rules as overbroad, internally inconsistent, and unclear. ACA Int’l v. FCC, 885 F.3d 687 (D.C. Cir. 2018). That litigation arose from direct challenges from businesses and industry associations to the FCC’s rulings on various issues, including the FCC’s broad interpretation of the term ATDS. Thus, the task before the Ninth Circuit was to decide whether the Textmunication system was an ATDS based on the bare language of the TCPA itself, ignoring the prior fifteen years of FCC rulemaking. While the D.C. Circuit in ACA Int’l suggested that the FCC’s rulings amounted to overreach in many instances, the Ninth Circuit, ruling on a blank slate, adopted an interpretation of ATDS as broad as anything proposed by the FCC.
The court first held that the statute was ambiguous on its face as to whether targeted dialing of stored numbers, as opposed to numbers generated randomly or sequentially, was covered. It found the definition of ATDS ambiguous and turned to other provisions of the TCPA to glean Congress’s intent. It found that other provisions of the statute refer to the use of an “autodialer” in contexts that clearly refer to the dialing of specific identified numbers. For example, the Act allows use of an autodialer for calls made with “prior express consent of the called party.” 47 U.S.C. § 227(b)(1)(A) (1991). Thus, the Act itself seems to acknowledge that an autodialer can be used in a way other than dialing numbers in a purely random or sequential manner. As a result, the Ninth Circuit held that a system can constitute an ATDS, and fall within the scope of the TCPA, if it has the capacity “(1) to store numbers to be called or (2) to produce numbers to be called, using a random or sequential number generator—and to dial such numbers automatically.” (Emphasis added.)
Second, the court held that the word “automatic” in the TCPA does not mean the system has to work without any human interaction. A system that is turned on, programmed, and directed by a human to dial numbers pursuant to a specific set of criteria still constitutes an “automatic telephone dialing” system within the meaning of the Act. Thus, because the “Textmunication system stores numbers and dials them automatically to send text messages to a stored list of phone numbers,” the court found that summary judgment was not appropriate. The district court’s ruling was vacated and the case remanded for further proceedings.
The Marks decision is contrary to a recent decision by the Third Circuit in Dominguez v. Yahoo, Inc., No. 17-1243 (June 26, 2018). In that case the plaintiff received numerous unwanted text messages from Yahoo after he was assigned a new cell phone number that had previously been assigned to a Yahoo customer who agreed to receive such texts. In that case, unlike Marks, the court held that plaintiff had to establish that the Yahoo text system had the capacity to generate numbers randomly or sequentially in order to constitute an ATDS. But the Yahoo system was anything but random. It was sending plaintiff the texts for a specific reason related to the account of the Yahoo subscriber who previously was assigned that number. As a result, summary judgment was affirmed. However, the Third Circuit’s opinion is far less thorough in its discussion of the definitional issues in the TPCA than the Ninth Circuit’s decision in Marks.
The Ninth Circuit’s construction of the term “automatic telephone dialing system” based on the bare language of the TCPA essentially achieved the same objective the FCC has been trying to achieve for years through rulemaking, i.e., to bring modern computer-driven targeted marketing and communications systems like Textmunication within the scope of the TCPA. For the time being, lower courts will likely choose between the Ninth Circuit’s broad interpretation and Third Circuit’s more narrow approach in deciding future cases. But, at some point in the coming year, the FCC is expected to issue a new rulemaking that will provide new guidance on the ATDS definition. While the Obama-era FCC may have been expected to adopt an interpretation similar to that adopted by the Ninth Circuit in Marks, such is not likely to be the case today. The FCC under the Trump administration is controlled by a more business-friendly Republican majority, and its Chairman, Ajit Pai, was a vociferous dissenter from the FCC’s 2015 Declaratory Ruling and Order. Accordingly, many predict that the FCC will adopt a far more circumscribed view of its authority and regulatory reach under the TCPA.
We will continue to follow and report on developments in this area. For more information, please contact a member of the Nixon Peabody TCPA Editorial Team.
The Telephone Consumer Protection Act (TCPA) requires a caller to obtain prior express consent from a “called party.” This seems straightforward enough in a world where telephone numbers are permanently assigned to a consumer. In reality, however, over 35 million phone numbers are reassigned to a new subscriber every year. Can businesses argue that the consent they received sticks with the phone number? If not, how can they know when a number has been reassigned? This post outlines FCC and D.C. Circuit guidance on these issues, and offers an analysis of future solutions proposed by the FCC to mitigate potential TCPA liability stemming from calls placed to numbers that have been reassigned to a new subscriber.
Under the TCPA, businesses are required to obtain express consent from “called parties.” Until recently, the FCC had not defined “called party,” and there were debates as to whether it refers to the intended recipient of the call or the current subscriber. The FCC’s Declaratory Ruling from 2015 comprehensively addressed the question of whether a caller placing a call subject to the TCPA to a number reassigned from a consumer who gave consent is liable under the TCPA. In re Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991 (2015 Declaratory Ruling), 30 FCC Rcd. 7961, 7999 ¶ 71 (2015). The FCC clarified that the “called party” is the current subscriber and not the intended recipient of the call. Id. (“[T]he TCPA nowhere indicates that caller intent is relevant to the definition”). See also Osorio v. State Farm Bank, F.S.B., 746 F.3d 1242, 1250-52 (11th Cir. 2014); Soppet v. Enhanced Recovery Co., 679 F.3d 637 (7th Cir. 2012). The D.C. Circuit recently upheld the FCC’s interpretation of the term in ACA International v. FCC, 885 F.3d 687 (D.C. Cir. 2018).
Defining “called party” as the current subscriber only scratches the surface of these issues and leaves businesses vulnerable to potential liability despite good faith efforts to obtain consent. The result is a great deal of uncertainty. For instance, does a caller who misdials or calls a number he has no reason to believe has been reassigned risk liability under the TCPA? How can diligent callers learn whether numbers have been reassigned?
The Old Safe Harbor
Faced with the possibility of a strict liability structure for calls made to reassigned numbers even in good faith, the FCC crafted a limited safe harbor to protect a single call or text message sent post-reassignment. The FCC explained that callers “should be able to initiate one call after reassignment as an additional opportunity to gain actual or constructive knowledge of the reassignment and cease future calls to the new subscriber.” 30 FCC Rcd. at 7999, 8009 ¶¶ 72, 90. Notably, while the D.C. Circuit upheld the FCC’s definition of “called party,” it invalidated this safe harbor (and the 2015 Declaratory Order’s treatment of reassigned numbers as a whole) in ACA International, finding that it was an “arbitrary and capricious” adoption of the FCC’s “reasonable reliance” approach to interpreting prior express consent. 885 F.3d at 692. Specifically, the Court asked, “why does a caller’s reasonable reliance on a previous subscriber’s consent necessarily cease to be reasonable once there has been a single, post-reassignment call?” Id. at 707.
Preventing Liability and Moving to a New Safe Harbor
There have been no subsequent cases or FCC policies interpreting the ACA International ruling or the Notice of Proposed Rulemaking. Therefore, given the uncertainty of the current climate, a caller must have practices and protocols to help identify reassigned numbers. In its 2015 Declaratory Order, the FCC listed a number of best practices to reduce the likelihood of a caller calling a reassigned number. Some examples of these practices include better protocols with customer service agents to maintain accurate contact information, proactively sending periodic requests to customers to update their contact information, and utilizing an autodialer’s ability to identify disconnected numbers using “triple tones.” 30 FCC Rcd. at 8007-08 ¶ 86. The FCC also suggested that parties could agree that the consenting party has an obligation to notify the caller of any number reassignment. Id. While a failure by the consenting party to satisfy his obligation would not preserve consent for TCPA purposes, the caller would have an opportunity to pursue other legal remedies against the consenting party for breaching their agreement. Id. at ¶ 86 n.302.
While these policies would help to reduce uncertainty with regard to reassigned numbers, they are not foolproof, and businesses risk potential liability despite good faith adherence to the FCC’s suggested practices. As a result, the FCC is exploring the adoption of a reassigned numbers database. Prior to the ACA International ruling, the FCC had issued a Second Notice of Inquiry to assess potential reassigned number database models. See 32 FCC Rcd. 6007, 6013 ¶¶ 16-19 (2017). In light of the D.C. Circuit’s endorsement, the database model, and invalidation of the safe harbor provision and reassignment rule, the FCC published a Second Further Notice of Proposed Rulemaking (FNPRM) on April 23, 2018. See Advanced Methods to Target and Eliminate Unlawful Robocalls, 83 Fed. Reg. 17631 (proposed Apr. 23, 2018); ACA International, 885 F.3d at 709 (stating that a database model has “greater potential to give full effect to the Commission’s principle of reasonable reliance.”).
The FNPRM focuses on two main issues: the creation of a new safe harbor and the implementation of one of three proposed database models. On the question of a safe harbor provision, the FCC asks how the ACA International decision might impact its ability to establish a safe harbor, and whether, and under what circumstances, a safe harbor should be adopted. 83 Fed. Reg. 17631 at ¶ 31. Specific questions posed by the FCC include how frequently a caller would need to check the database, and what kind of liability would be protected by this safe harbor.
With regard to the creation of a database, the FCC asks commentators to consider three models of reporting by voice service providers: 1) mandatory reporting to a single FCC database administered by a third party; 2) mandatory reporting to one or more commercially available data aggregators; or 3) voluntary reporting to one or more commercially available data aggregators. Id. at ¶ 32. The FNPRM focuses on three practical issues; namely, what information should be included and would be necessary for callers who choose to use a database, how to ensure that information is reported to the database, and how to make the information available to interested callers. Id. at ¶ 8. The comment period for the FNPRM closes June 7, 2018.
As TCPA cases continue to increase across the country, businesses making calls subject to the TCPA need to be aware of their potential liability and need to implement compliance policies as soon as possible that include policies around reassigned numbers. While the FCC is indicating that it intends to adopt a reassigned numbers database for callers to use to minimize their liability, significant practical questions remain with regard to both this potential prevention tool and to the possibility of a safe harbor. In this interim phase, that is from the time of the D.C. Circuit’s invalidation of the 2015 Declaratory Order’s treatment of reassigned numbers to the time when the FCC clarifies the issue by an updated Order, or by the announcement of a database, callers are advised to assess their current practices and to adopt as many preventative measures as possible to avoid potentially costly liability.
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.
Earlier today the D.C. Circuit issued a highly anticipated decision in a challenge to the July 10, 2015 Federal Communication Commission (FCC) Declaratory Ruling and Order (FCC ruling) that expanded the scope of the Telephone Consumer Protection Act (TCPA). Most critically, today’s decision scales back the expansive FCC ruling in two significant areas: (1) the statute’s definition of an “automatic telephone dialing system” (commonly referred to as “ATDS” or “autodialer”) and (2) liability for calling “reassigned” telephone numbers. But the D.C. Circuit also upheld two aspects of the FCC ruling: (1) reaffirming the FCC’s ruling that consumers can revoke consent to telemarketing by any reasonable means and (2) sustaining the scope of the FCC’s exemption for time-sensitive health care calls.
The FCC 2015 order
The FCC issued an omnibus Declaratory Ruling and Order in July 2015, significantly expanding the TCPA and making it more consumer-friendly. Among other things, the FCC broadened the definition of “autodialer,” created a one-call safe harbor for calls made to “reassigned numbers,” and allowed for broad revocation of consent by consumers. We concluded at that time that “the ruling largely comes down in favor of consumer interests and gives short shrift to business concerns.” For more detail about the FCC ruling, you can read our alerts on the July 2015 FCC order here and here.
The consumer-friendly approach of the ruling led to a significant increase in TCPA litigation as the burden on plaintiffs seeking to prove TCPA claims was significantly reduced. On the other hand, far from reducing the number of autodialed- and robo- calls, the FCC ruling appears to have had little effect in curbing bad actors.
D.C. Circuit decision
The D.C. Circuit struck down the FCC’s definition of “autodialer” and the FCC’s approach for liability when calling “reassigned numbers” while upholding the FCC’s holding for revocation of consent and the FCC’s approach to carving a time-sensitive health care call exemption.
For purposes of TCPA litigation, the FCC’s broad interpretation of the definition of an autodialer was the most significant issue before the D.C. Circuit. The TCPA defines “automated telephone dialing system” as “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). The FCC ruling held that the “capacity” of equipment includes not just its “present ability” but also “its potential functionalities” or “future possibility.” This expansive holding significantly increased the scope of the definition of an autodialer, seemingly sweeping in almost any modern telecommunications device. Under the FCC’s view, because a smartphone can be made to function as an autodialer with simple software modifications or by downloading an application, any ordinary smartphone is effectively an autodialer subject to the TCPA regulations because of that theoretical “capacity.” As a result, plaintiffs faced almost no hurdle in alleging a defendant utilized an autodialer.
The D.C. Circuit struck down the FCC’s broad definition of “autodialer” finding the commission’s interpretation of the term “capacity” to be “utterly unreasonable.” The court was extremely troubled by the fact, all but admitted by the FCC, that any smartphone could meet this definition and rejected the idea that Congress intended such an expansive interpretation. The D.C. Circuit was not persuaded by the FCC’s argument that in fact, the FCC ruling did not reach a definitive resolution on whether a smartphone qualifies as an autodialer, holding that, even if that were true, such lack of clarity (and logical inconsistency) would render the FCC’s ruling on this issue “arbitrary and capricious.” The court therefore set aside the FCC’s definition of “autodialer” and the FCC will now be tasked with issuing an updated ruling consistent with the decision.
The D.C. Circuit also took issue with the FCC ruling because the FCC seemed to suggest at different points in its ruling and in its briefing that equipment must itself have the functional ability to generate (that is, create) random or sequential numbers to be dialed, while at other points in its ruling suggesting that an autodialer need not generate its own numbers randomly or sequentially, but may simply dial numbers from a pre-existing list randomly or sequentially. The former scenario is most often viewed as what the TCPA was enacted to prevent—the completely random dialing of numbers (a carpet bombing approach to telemarketing). The latter scenario, however, is more typical of how telemarketers work today, calling targeted pre-identified numbers from a database. The D.C. Circuit suggested that either interpretation could be permissible, but it took issue with the FCC ruling to the extent that it failed to definitely pick one of these interpretations. While a decisive statement (from the court) that equipment simply calling from a previously-identified list of numbers does not run afoul of the TCPA would have been welcome news for callers (as discussed in more detail below) with a newly re-configured FCC set to issue a consistent ruling, we believe a more business-friendly decision remains possible down the road.
The TCPA makes it unlawful “to make any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing equipment or prerecorded voice.” 47 U.S.C. § 227(b)(1)(A).
The FCC ruling held that the “called party” refers to the current subscriber of the phone number, not the intended recipient. With thousands of mobile phone numbers being reassigned every day, the FCC ruling created a compliance nightmares for businesses—a caller intending to call a consumer that had provided consent for the call may unwittingly call a different person if the previous consumer’s phone number was reassigned to a new person. Despite a business’s good faith efforts to obtain consent and only call persons who had given consent, reassignment of numbers creates a risk of TCPA liability that is difficult to avoid. The FCC ruling attempted to account for this issue by providing a one-call safe harbor, where the caller would be immune from liability for the first call after a number is reassigned. However, the FCC ruling held that after the first call, the caller would be charged with constructive notice of the reassignment and face liability for any subsequent calls—even if the caller did not have actual notice (for example, if the caller received no answer or was intentionally misled by the new subscriber to induce future calls in violation of the TCPA).
The DC Circuit, as an initial matter, agreed with the FCC that its interpretation of “called party” refers to the actual recipient of the call (the current subscriber to the phone number), not the intended recipient. However, the court found that the FCC provided no reasoning for limiting the “safe harbor” to one call and, therefore, the FCC ruling was deemed “arbitrary and capricious.” The D.C. Circuit noted the inherent inconsistency in the FCC’s reasoning where the FCC credited a caller’s “reasonable reliance” on the consent it had received for the first call after reassignment, but rejected the notion that a caller could continue to reasonably rely on the same consent for subsequent calls absent actual notice of the reassignment. The D.C. Circuit set aside the FCC’s treatment of reassigned numbers as a whole and indicated that the FCC should issue a ruling with more robust reasoning. As an aside, the court pointed out that the FCC is already on its way to designing a new system to avoid the problems of the FCC ruling’s one-call safe harbor by creating a comprehensive repository of reassigned numbers. In conjunction with that repository, the FCC is considering implementation of a new rule that would provide a safe harbor for businesses that consult that repository on a regular basis before making calls. It therefore seems likely that the FCC will craft a new rule that will give businesses a more realistic system for avoiding calls to reassigned numbers and that will be more effective at actually reducing the frequency of such unwanted calls while at the same time reducing potential TCPA liability for businesses.
Revocation of consent
While the TCPA is silent on revocation of consent, the FCC ruling held that consumers may revoke previously provided consent by “any reasonable means” including orally or in writing. The challenge to the FCC ruling argued that callers should be able to dictate the methods of revocation of consent.
The D.C. Circuit disagreed with petitioners and upheld the FCC ruling with respect to revocation of consent, holding that callers cannot unilaterally prescribe exclusive means for consumers to revoke consent. The court found that concerns about unique methods of revoking consent were overstated because the FCC ruling specifically absolved companies of adopting systems that would entail “undue burden” and revocation was still limited to “reasonable means.” Importantly, the court noted that neither the FCC ruling nor its decision affected bilateral contractual language that dictates specific methods for revoking consent.
Health care exemption
Finally, the D.C. Circuit reviewed the FCC’s narrow health care exemption. Pursuant to authority in the statute, the FCC had been petitioned to exempt from the consent requirement “certain non-telemarketing, health care calls” that provide “vital, time-sensitive information patients welcome, expect and often rely on to make informed decisions. In the FCC ruling, the FCC granted the petition but restricted it to “calls for which there is exigency and that have a health care treatment purpose,” including calls or texts regarding appointment confirmations, reminders, wellness checkups, hospital pre-registration instructions, pre- and post-operative instructions and lab results. The FCC did not extend the exemption to include telemarketing, solicitation or advertisement calls, or calls that include accounting, billing, debt collection, or other financial content.
The D.C. Circuit upheld the scope of this exemption against Rite Aid’s challenge. Rite Aid argued that the TCPA regulations conflicted with the regulations of the Health Insurance Portability and Accountability Act of 1996 (HIPPA). The D.C. Circuit rejected this argument, finding that there is no obstacle to complying with both the TCPA and HIPPA as the two statutes “provide separate protections.” The D.C. Circuit also rejected Rite Aid’s assertion that the FCC’s line drawing on this exemption was arbitrary and capricious.
This decision on the whole is welcome relief to businesses that call or text consumers. While not explicitly outlining any new rules, the D.C. Circuit provided instructions for the FCC to issue new rulings that will be narrower in scope than the 2015 ruling. The FCC will now revisit the questions of (1) the definition of “autodialer” and (2) reassigned numbers, and issue a ruling consistent with the D.C. Circuit’s decision. Since the ruling in 2015, we have had a change in administration. Republicans are now in control of the FCC with a three-to-two majority and Ajit Pai heading the agency as its chair. Those three Republican commissioners include two that dissented to the FCC ruling and those dissents will likely provide a roadmap for how the reconfigured FCC will rule. Notably, we anticipate a narrower definition of “autodialer” that is limited to “present ability” and perhaps even carve out equipment that simply dials telephone numbers from a previously created list of numbers. We also expect the FCC to continue to explore and implement a reassigned number registry that it has already begun to investigate and appears to have been explicitly endorsed by the D.C. Circuit. In the meantime, as we wait months or even years for new FCC guidance, we can expect courts across the country that are presently confronting TCPA litigation to look to the logic and reasoning in the D.C. Circuit decision. At a minimum, the FCC’s previous guidance on these issues is no longer persuasive authority in the courts, much less binding.
Communication with consumers has never been easier, but there are a myriad of ways companies can run afoul of consumer protection laws that regulate such communications, including the TCPA, CAN-SPAM, and laws regarding social media and sweepstakes. We invite you to join us on May 30th at the Cambridge Innovation Center where we'll discuss these laws and regulations, and provide insight into how businesses can comply while still marketing their goods and services. Click here to register.
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).
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.