The Supreme Court Weighs in on the Telephone Consumer Protection Act

 

By: Caren D. Enloe

On April 1, 2021, the United States Supreme Court unanimously held that in order to qualify as an automated telephone dialing system under the Telephone Consumer Protection Act (the “TCPA”), a device must have the capacity either to store a telephone number using a random or sequential number generator or to produce a telephone number using a telephone number using a random or sequential number generator.  Facebook, Inc. v. Duguid, 592 U.S. __, 41 S. Ct. 1163, 2021 U.S. LEXIS 1742 (Apr. 1, 2021).  The decision will have significant ramifications on TCPA litigation nationwide.

Historical Background

The TCPA was passed in 1991 to address the “proliferation of intrusive, nuisance calls” from telemarketers. In doing so, the TCPA prohibited, with limited exceptions, calls made using an automated telephone dialing system (“ATDS”) or “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.” Id. §227(a)(1).   For years, parties have debated what constitutes an ATDS.  In 2015, a split FCC issued an Omnibus Declaratory Ruling and Order in which it broadly interpreted an ATDS to include dialing equipment that generally has the capacity to store or produce, and dial random or sequential numbers (and thus meets the TCPA’s definition of “autodialer”) even if it is not presently used for that purpose, including when the caller is calling a set list of consumers.  In the Matter of Rules & Regulations Implementing the Telephone Consumer Protection Act of 1991, Declaratory Ruling & Order, 30 FCC Rcd, 7961 (2015).  The FCC 2015 Order rejected any “present use” or current capacity test and held that capacity of an autodialer is not limited to its current configuration and includes its potential functionalities even if it currently lacks the requisite software. Thus, the FCC affirmed that “dialing equipment that has the capacity to store or produce, and dial random or sequential numbers… [is an autodialer] even if it is not presently used for that purpose.” FCC 2015 Order at ¶ 10 (emphasis supplied).  The Order further confirmed the majority’s focus on whether the equipment can dial without human intervention and whether it can “dial thousands of numbers in a short period of time”.  Id. at ¶ 17.  In 2018, the D.C. Circuit set aside the FCC’s interpretation, calling it an “eye-popping sweep.”  ACA International v. Federal Communications Commission, 885 F.3d 687, 697 (D.C. Cir. 2018).  Since then, the definition of an ATDS has been rigorously debated in the courts, creating a split.  See Dominguez v. Yahoo, Inc., 894 F.3d 116 (3^rd Cir. 2018) (SMS Service did not qualify as an ATDS because it did not have the present capacity to function as an ATDS); but see Marks v. Crunch San Diego, 904 F.3d 1041 (9^th Cir. 2019) (holding that the statutory definition of ATDS includes a device that stores telephone numbers to be called, whether or not those numbers have been generated by a random or sequential number generator).

Factual Background

Enter Noah Duguid who received several text messages from Facebook notifying him that someone was attempting to access his Facebook account from an unknown device or browser.  Duguid, who did not have an account with Facebook and had not provided his phone number or consent to be contacted by Facebook, brought a putative class action alleging violations of the TCPA.  Facebook moved to dismiss arguing that Duguid had failed to allege that the numbers were randomly or sequentially generated.  The trial court agreed and dismissed.  On appeal, the Ninth Circuit reversed and in keeping with its prior decision in Marks, held that an ATDS does not have to use a random or sequential generator to store numbers – it only has to have the capacity to “store numbers to be called” and “to dial such numbers automatically.” Duguid v. Facebook, Inc., 926 F. 3d 1146, 1151 (2019).  The Supreme Court granted Facebook’s petition for certiorari on a single issue: whether the definition of ATDS in the TCPA encompasses any device that can “store” and “automatically dial” telephone numbers, even if the device does not “us[e] a random or sequential number generator.”

The Court’s Holding

In a unanimous decision by Justice Sotamayor, the Court  reversed.  In doing so, the Court first examined the text of the statute in the context  of conventional rules of grammar and punctuation.  The Court concluded that the qualifying phrase “using a random or sequential number generator” applies to both verbs – store and produce.  Slip Op. at 5. Simply put, “Congress’ definition of an autodialer requires that in all cases, whether storing or producing numbers to be called, the equipment in question must use a random or sequential number generator.”  Id. at 7. 

The Court went on to examine the definition in the statutory context and likewise concluded that it likewise affirmed their conclusion.  The Court noted that the other prohibitions within the TCPA target a unique type of telemarketing equipment that risks dialing emergency lines or tying up all sequentially numbered lines of a single entity.  “[E]xpanding the definition of an autodialer to encompass any equipment that merely stores and dials telephone numbers would take a chainsaw to these nuanced problems when Congress meant to use a scalpel.” Id. at 8.  The Court additionally found problematic a definition which would encompass all modern-day cell phones as autodialers. Id. at 9.

The Decision’s Impact

The impact of the decision remains to be seen, but it will not eliminate TCPA litigation which has proven itself to be a profitable business for the consumer bar.  A number of cases were stayed pending the outcome of Facebook. While many of the cases may be resolved by the Court’s decision.  Others will not be.  See, e.g., McEwen v. National Rifle Assoc., 2021 U.S. Dist. LEXIS 72133 (D. Me. Apr. 14, 2021) (dismissing four of six claims and allowing the remaining two to proceed forward).  Cases involving automated messages, automated voices and the Do Not Call List will continue forward as they are not impacted by the Court’s decision.  Additionally, it is likely that consumer litigants will continue to poke holes in the definition of an ATDS by examining the boundaries of capacity and the role of human intervention. Finally, with a Democratic majority, it would not be surprising to see Congress revisit the TCPA in response to the Court’s decision.

District Court Rules That a Telemarketer’s Single Unanswered Call Creates Article III Standing

By: Zachary K. Dunn

A single missed call from a telemarketer constitutes a concrete injury that gives rise to standing, a federal district court in California has ruled. In Shuckett v. DialAmerica Marketing, Inc., 2019 U.S. Dist. LEXIS 29598 (S.D. Cal. Feb. 22, 2019), the defendant DialAmerica was hired by another company, American Standard, to conduct telemarketing calls. Ms. Shuckett, the plaintiff, alleged in her complaint that she had received a series of telemarketing phone calls on behalf of American Standard, each of which violated the Telephone Consumer Protection Act (“TCPA”). Both DialAmerica’s and Shuckett’s phone records indicate that DialAmerica only made one phone call to Schuckett (the other telemarketing calls Shuckett received emanated from another company), and that the single call contained 0 minutes of “talk time,” meaning that Shuckett did not answer it.

While DialAmerica conceded that a single call can give rise to a concrete injury, it contended that because the call went unanswered Shuckett could not have been harmed and therefore did not have standing to pursue a TCPA claim. For her part, Shuckett alleged that the call caused her nuisance and invaded her privacy, thereby injuring her.

The district court sided with Shuckett and found that she had standing to pursue her TCPA claim against DialAmerica. Under the landmark Supreme Court case Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 194 L. Ed. 2d 635 (2016), a federal statute is insufficient by itself to confer standing. Instead, a plaintiff must show that he or she suffered an actual, concrete injury that is traceable to the conduct of the defendant. The district court noted that other courts have held that a text message gave rise to standing under the TCPA, and found no meaningful difference between a text message and an unanswered phone call. Both, according to the district court, “invade the privacy and disturb the solicitude” of the recipient and thereby create an injury.

Interestingly, the court left open the possibility that “[h]ad the call gone entirely unnoticed, perhaps this would be a different case” because the plaintiff would not have sustained an injury. That was not the case here, though: “While it appears undisputed that Shuckett did not pick up the call, there is no evidence that she was entirely unaware of it.” Therefore, the court ruled that Shuckett had standing to pursue her TCPA claim against DialAmerica.  

Takeaways from Shuckett

Shuckett reminds us that even a single phone call can lead to liability under the TCPA, and informs us that a plaintiff may have standing even if he or she did not pick up the call. However, this case does leave a small amount of hope for telemarketers; if the plaintiff admits to not noticing the phone call, then he or she may not have standing to pursue TCPA claims.  

Zachary Dunn is an attorney practicing in Smith Debnam’s Consumer Financial Services Litigation and Compliance Group

TCPA, FDCPA Complaints Show Decrease in 2018

According to WebRecon's December 2018 Report, TCPA and FDCPA complaints showed a substantial decrease in 2018.  WebRecon reports that, in comparison to 2017, FDCPA suits decreased 7.8% in 2018 and TCPA suits decreased 13.2% in 2018.  According to WebRecon, "FDCPA complaints are at their lowest point since 2008."  Picking up the slack were FCRA suits which increased 4.3%.  Interestingly, complaints to the  CFPB increased 5.9% in 2018 despite a more business friendly CFPB regime.  For further analysis, please check out WebRecon's blog which provides monthly analysis for the industry at WebRecon.

Text messages to a Gym Member Did Not Require Express Written Consent Under the TCPA

By: Caren Enloe and Zachary Dunn

Text messages from a gym to its member were informational in nature and therefore did not violate the TCPA, a district court in Louisiana ruled late last month. The case, Suriano v. French Riviera Health, Spa, Inc., 2018 U.S. Dist. LEXIS 216018 (E.D. La. Dec. 20, 2018), centered on five text messages sent by French Riviera Health Spa (the “Gym”) to Suriano. The five text messages read as follows:

1. Dear member, Welcome to Riviera Fitness! Where your fitness is our strength. We’re excited to have you as a member. Have a great workout!
2. Dear member, We offer a variety of classes and small group training. Click here (http://tinyurl.com/yag8aohah), for class schedules.
3. Dear member, Become your best self with.our Personal Trainers. Ask us for info on our PT program. (http://tinyurl.com/yc8zaep8).
4. Follow us on social media! Facebook (http://tinyurl.com/Y8m7okwe) Instagram (http://tinyurl.com/y77ocpjh).
5. Dear member, Did you know that we have a blog? Each month we post workout tips, testimonials and much more!

Suriano had recently joined the Gym and, in doing so, provided his phone number in multiple places on his application. However, Suriano had not provided prior express written consent to receive advertising or telemarketing messages.

The issue before the court was whether the five text messages were telemarketing or advertising messages requiring prior express written consent to receive such messages. In 2012, the FCC issued new regulations requiring prior express written consent for messages contained telemarketing and advertising content. The 2012 regulation defined advertisement as “any material advertising the commercial availability or quality of any property, goods, or services,” and telemarketing as “the initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services.” While advertising and telemarketing messages require express written consent to comply with the TCPA, messages that are informational in nature only require a lesser threshold of prior consent which may be obtained by simply providing the number at issue in the application process.

In Suriano, the consumer provided prior consent by providing his cell number in multiple places on the Gym application; however, he did not provide prior express written consent to receive telemarketing and advertising messages.  After examining each of the messages to determine if they were telemarketing or advertising messages, the court concluded that all five messages were informational. Messages one, two, and five, the court held, were “plainly informational in nature,” as they were a welcoming message, a link to classes and training schedules, and a link to a blog containing workout tips, respectively.

The other two messages – messages three and four – were a closer call. The court considered the third message (encouraging Suriano to sign up for personal trainers) and noted that, under some circumstances, it could be considered an advertisement for its personal training services. However, since Suriano had already paid for six months of personal training sessions from the Gym, the court reasoned that message three “merely encouraged [Suriano] to take advantage of the personal training services for which he already paid.” Finally, the fifth message was informational because it simply encouraged Suriano to follow the Gym on social media. While the court noted that the Gym’s social media pages “in all likelihood do have a promotional aspect,” message five was not advertising or telemarketing under the relevant 2012 regulatory definitions of those terms. Finding all five messages to be informational, the court dismissed Suriano’s complaint.

Takeaways from Suriano

Suriano serves as a reminder that service providers must be careful in crafting text messages to their customers. Whether messages are considered advertising or promotional can be highly fact specific and will focus on the facts and circumstances regarding the individual consumer involved. Messages should be crafted such that they are informational in nature unless the service provider obtains express written consent to send advertising and telemarketing material.

District Court Holds Revocation of Consent Ineffective in the Face of Contractual Consent

Relying upon basic principles of contract law, an Alabama district court has held that there are limitations to revocation of prior express consent.  In Few v. Receivables Performance Management, 2018 U.S. Dist. LEXIS 134324 (N.D. Ala. Aug. 9, 2018), the consumer sought damages for alleged violations of the Telephone Consumer Protection Act (the “TCPA”).  In her complaint, Few alleged that the collection agency violated the TCPA by contacting her at least 184 times using an automated telephone dialing system after she revoked her consent.

In the underlying contract between Few and the creditor, however, Few provided a telephone number where she could be reached and provided the creditor, and/or any debt collection agency  hired by the creditor, with consent to contact her at that number to recover any unpaid portion of her obligation to the creditor.  Moreover, Few consented to receiving communications through an automated telephone dialing system or prerecorded messaging system.  When the collection agency contacted Ms. Few to collect upon the account, Ms. Few attempted to revoke her consent by informing them she no longer wished to receive calls. When the collection agency continued to call, Ms. Few filed suit and alleged that she had revoked her consent.

On the collection agency’s motion for summary judgment, the issue before the court was whether Ms. Few effectively revoked her prior express consent.  The collection agency maintained that she could not unilaterally revoke her consent because the contract term that provided consent was bargained for consideration.  In reviewing the issue, the court relied upon common law concepts of consent and black letter contract law.  The court first noted that common law concepts of consent only allow unilateral revocation where there is no contractual restriction to the contrary.  The court then noted that black letter contract law provides that one party may not alter a bilateral contract by revoking a term without the consent of the other party. The court therefore concluded that because “Ms. Few gave prior express consent to Receivables to make the calls, and, because she offered that consent as part of a bargained-for exchange and not merely gratuitously, she was unable to unilaterally revoke that consent.” Few at *6.

The decision follows other recent court opinions which appear to be aligning with a narrower view of revocation of consent and provides a couple of points to consider.  See also Reyes v. Lincoln Automotive Fin. Servs., 861 F.3d 51 (2^nd Cir. 2017).

• Does the inclusion of prior express consent within the terms of the contract erode or eviscerate the consumer’s ability to revoke consent?  This opinion, as well as Reyes, seem to suggest that possibility.
• How specific does prior express consent need to be?  Probably the more specific the better.  In this case, the consumer provided:
  • prior express consent to be contacted at a specific number;
  • to specific persons – the creditor and any debt collection agency;
  • for a specific purpose including the collection of an unpaid balance; and
  • by specific means – an automated telephone dialer or automated messaging.

While the decision is a bright spot for the industry, collection agencies should continue to use caution and closely examine underlying contract documents for prior express consent before employing automated dialing system technology when calling consumers.

Aftershocks Being Felt: The TCPA After ACA International v. FCC

The aftershocks from the D.C. Circuit’s opinion in ACA International v. FCC are beginning to be felt.  In ACA International, the D.C. Circuit set aside several elements of the FCC’s 2015 Declaratory Ruling.  A recent opinion by the Third Circuit demonstrates some of the repercussions of that decision.

In Dominguez v. Yahoo, Inc., 2018 U.S. App. LEXIS 17436 (3^rd Cir. June 26, 2018), the Third Circuit affirmed a judgment in favor of Yahoo despite the fact that the consumer received 27,800 unwanted text messages.  In Dominguez, the consumer purchased a cell phone with a reassigned number.  The prior owner of the number had a subscription with Yahoo’s Email SMS Service which sent a text every time the prior owner received an email.  Because the prior owner of the number never cancelled the subscription, Mr. Dominguez became the recipient of 27,800 unwanted text messages.  Mr.  Dominguez filed a putative class action against Yahoo asserting violations of the TCPA.  The problem?  The district court concluded that the Email SMS Service did not qualify as an automated telephone dialing system (“ATDS”) because it did not have the capacity to store or produce telephone numbers using a random or sequential number generator.  On remand from a prior appeal, the consumer amended his complaint to take advantage of the FCC’s 2015 Declaratory Ruling and alleged that the Email SMS Service had the “latent or potential capacity” to store or produce telephone numbers using a random or sequential number generator.  The trial court again concluded that the Email SMS Service did not qualify as an ATDS.

On appeal, the Third Circuit relied upon the D.C. Circuit’s holding in ACA International to support its conclusion that the statutory definition of an ATDS requires the present capacity to function as an autodialer. In doing so, the court relied upon two key findings: first, that the Email SMS Service only sent messages to numbers that had been individually and manually inputted into its system by a user; and secondly, that the messages were sent because the previous owner of the message affirmatively opted to receive them and not because of a random number generation.  Dominguez, *9. 

The opinion is a positive for the ARM industry because it demonstrates the potential impact of the D.C. Circuit’s decision and will likely to be followed by others that will more narrowly define the meaning of an ATDS.

DC Circuit Turns Away Healthcare Challenges to TCPA Declaratory Ruling

By Zachary K. Dunn

In ACA International v. Federal Communications Commission, 2018 U.S. App. LEXIS 6535 (2018), the DC Circuit rejected a series of challenges to the FCC’s 2015 Declaratory Ruling brought by Rite-Aid related to the partial-exemption to the prior-consent requirement for healthcare related calls. The Court rejected two separate arguments: first, that the Declaratory Ruling conflicts with HIPPA; and second, that the Declaratory Ruling’s exemption for “certain healthcare calls” but not others was arbitrary and capricious.

 Declaratory Ruling’s Partial Exemption for Healthcare Related Calls

The TCPA contains a prior-consent requirement for calls to wireless numbers, but permits the FCC to exempt from that requirement “calls to a telephone number assigned to a cellular telephone service that are not charged to the called party, subject to such conditions as the [FCC] may prescribe as necessary in the interest of the privacy rights this section is intended to protect.” 47 U.S.C. § 227(b)(2)(C).

During the rulemaking process which resulted in the Declaratory Ruling, the FCC was petitioned to exempt from the prior-consent requirement “certain non-telemarketing, healthcare calls” alleged to “provide vital, time-sensitive information patients welcome, expect, and often rely on to make informed decisions.” While the FCC found that calls “regarding post-discharge follow-up intended to prevent readmission, or prescription notifications” were in the public interest – and chose to exempt them from the prior-consent requirement – the FCC “fail[ed] to see the same exigency and public interest in calls regarding account communications and payment notifications.” It therefore did not exempt those calls from the TCPA’s prior-consent requirement. It was this partial exemption, which did not include exemptions for billing and payment notifications, that was challenged and ultimately upheld by the Court.

Conflict between Declaratory Ruling and HIPPA

In ACA International, Rite Aid first contended that by “restricting otherwise permissible HIPPA communications,” the Declaratory Ruling conflicts with another federal law. Under HIPAA regulations, covered entities and their business associates presumptively “may not use or disclose protected health information,” 45 C.F.R. § 164.502(a), but they are generally permitted to use or disclose that information “for treatment, payment, or health care operations.” Id. § 164.506(a).

At the DC Circuit, Rite Aid argued that that the partial exemption conflicts with HIPAA because it stops short of exempting billing- and account-related communications—i.e., ones “for . . . payment” and therefore conflicted with 45 C.F.R. § 164.506(a). The Court did not agree, and reasoned that while § 164.506(a)’s exclusion carves out an exception to civil and criminal liability for using or disclosing protected health information, it says nothing about the FCC’s “authority to exempt (or refrain from exempting) certain kinds of calls from the TCPA’s consent requirement.” Therefore, the Court held, “the [FCC] did not restrict communications that HIPAA requires be permitted to flow freely. It simply declined to make certain exchanges even less burdensome than they would have been by default.”

Whether the Partial Exemption is Arbitrary and Capricious

Rite Aid also contended that the Declaratory Ruling’s partial exemption for certain healthcare related calls, but not others, was arbitrary and capricious. Rite Aid made two arbitrary and capricious arguments.

First, Rite Aid argued that the FCC had failed to explain the reason for its departure from its earlier practice of exempting all HIPPA-protected communications to landlines from TCPA’s regulations. The Court recognized that in a 2012 Order, the FCC exempted all “health care message[s]” to residential numbers – including messages related to billing – from the TCPA’s requirements because such messages were “already regulated by” HIPPA. The Court also acknowledged that the 2012 Order “swept more broadly than” the 2015 Declaratory Ruling’s partial exemption.

However, the Court refused to find the differing treatment regarding residential and wireless numbers to be arbitrary and capricious, holding that “[e]ven if one might hypothesize important reasons for treating residential and wireless telephone lines the same, the TCPA itself presupposes the contrary—that calls to residential and wireless numbers warrant differential treatment.”

Rite Aid also challenged the partial exemption as arbitrary and capricious because it failed to “recognize that all healthcare-related calls satisfy the TCPA’s ‘emergency purposes’ exception to the consent requirement.” As used in the TCPA, “[t]he term emergency purposes means calls made necessary in any situation affecting the health and safety of consumers.” 47 C.F.R. § 64.1200(f)(4). Rejecting this challenge, the Court held that Rite Aid had identified “no calls satisfying that exception that were not already subject to the 2015 exemption.” The Court also found that it would be “implausible” to conclude that calls concerning telemarking, solicitation, or advertising content, or which include accounting, billing, debt-collection, or other financial content are made for emergency purposes.

Zachary Dunn is a member of Smith Debnam's Consumer Financial Services Litigation and Compliance practice.

D.C. Circuit’s Ruling May Provide Some Potential Relief for the Consumer Financial Services Industry

The D.C. Circuit has issued its long-awaited decision on the FCC’s 2015 TCPA Declaratory Ruling.  ACA International v. Federal Communications Commission, No. 15-1211 (Mar. 16, 2018).  The ruling invalidates the FCC’s definition of an automated telephone dialing system (“ATDS”) and sets aside the FCC’s ruling on reassigned numbers.  The ruling, however, upholds the FCC’s determination that consent can be revoked through any reasonable means.

The 2015 Declaratory Ruling.

In July of 2015, the FCC issued its highly controversial ruling on 21 petitions seeking review of various aspects of the Telephone Consumer Protection Act (the “TCPA”).  In the Matter of Rules & Regulations Implementing the Telephone Consumer Protection Act of 1991, Declaratory Ruling & Order, 30 FCC Rcd, 7961 (2015) (“Order”).  Two commissioners issued impassioned dissents, noting that the Order “expands the TCPA’s reach” and “twists the law’s words…to target useful communications between legitimate businesses and their customers.”  Dissenting Statement of Commissioner Ajit Pai.  Immediately following the ruling, ACA International, a major trade group for the collection industry, filed suit against the FCC in the United States Court of Appeals for the D.C.  Circuit seeking a judicial review of the Order. 

While the D.C. Circuit’s review focused on four aspects of the FCC Ruling, this post will limit itself to an examination of the three aspects most relevant to the consumer financial services industry.  Before discussing the D.C. Circuit’s holding, here is a reminder of the FCC’s Ruling on the relevant issues:

• The Definition of an ATDS.  The FCC Ruling rejected any “present use” or current capacity test.  The FCC held that capacity of an autodialer is not limited to its current configuration and includes its potential functionalities even if it currently lacks the requisite software. Thus, the FCC affirmed that “dialing equipment that has the capacity to store or produce, and dial random or sequential numbers… [is an autodialer] even if it is not presently used for that purpose.” Order at ¶ 10 (emphasis supplied).  The Order further confirmed the majority’s focus on whether the equipment can dial without human intervention and whether it can “dial thousands of numbers in a short period of time”.  Id. at ¶ 17.  The dissent was highly critical of the majority’s holding, particularly as it related to capacity, its statutory interpretation of capacity, and the TCPA’s potential application to smart phones.  As noted by the dissent, if a system cannot store or produce telephone numbers to be called using a random or sequential number generator and it if cannot dial such numbers, it should not be included.  Commissioner (and now chair of the FCC) Pai described the majority’s test as being “whether there is “more than a theoretical potential that the equipment could be modified to satisfy the ‘autodialer’ definition.  Pai Dissent.
   

• Reassigned Numbers. The FCC Ruling addressed the question of where and when, a caller violates the TCPA by placing a call to a wireless number which has been reassigned from a consenting party to a third party without the caller’s consent.  The FCC refused to put any burden on the wrong number consumer to inform the caller that it is the wrong party or opt out of the calls.  Instead, the FCC established a one-call safe harbor stating that “where a caller believes he has consent to make a call and does not discover that a wireless number has been reassigned prior to making or initiating a call to that number for the first time after reassignment, liability should not attach for that first call, but the caller is liable for any calls thereafter.”  Id. at ¶85.
   

• Revocation of Consent. The FCC Ruling also clarified the ways in which a consenting party may revoke his consent to receive auto dialed calls.  Pursuant to the Ruling consent generally may be revoked through any reasonable means and the caller may not dictate how revocation may be made.  The FCC therefore held that “the consumer may revoke his or her consent in any reasonable manner that clearly expresses his or her desire not to receive further calls, and that the consumer is not limited to using only a revocation method that the caller has established as one that it will accept.”  Id. at ¶ 70.  Consent must be given by either the current subscriber or the non-subscriber customary user of the phone.

The D.C. Circuit’s Ruling.

The Definition of an ATDS.

Under the TCPA, an ATDS is defined 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).   Breaking down the definition, the Court looked at two questions.  First, when does a device have the “capacity” to perform the two enumerated functions (to store and dial numbers) and second, what precisely are those functions.  ACA International, Slip Op. at 12. The Court held that the FCC’s efforts to clarify what equipment qualifies as an ATDS provided an “eyepopping sweep” and the Court set it aside. ACA International, Slip Op. at 16. 

Regarding when a device has capacity to store and dial numbers, the court was highly critical of the FCC’s expansive interpretation of “capacity”, noting that it was incompatible with the statute’s original concern – telemarketing calls.  The Court was particularly troubled by the Order’s inescapable conclusion that “all smartphones, under the Commission’s approach, meet the statutory definition of an autodialer.” The Court concluded that the TCPA cannot be reasonably read to render every smartphone an ATDS subject to the TCPA’s restrictions. Id. At 15-17.    Applying a Chevron analysis, the court held that the FCC’s definition was arbitrary and capricious and lay beyond the FCC’s zone of delegated authority.  The Court concluded that “[n]othing in the TCPA countenances concluding that Congress could have contemplated the applicability of the statute’s restrictions to the most commonplace phone device used every day by the overwhelming majority of Americans.”  Id. at 19.

The Court next reviewed the FCC’s treatment of what functions must be present to constitute an ATDS.  Looking to the TCPA, the Court noted that to constitute an ATDS, a device must have capacity to perform two functions: (a) to store or produce numbers to be called using a random or sequential number generator; and (b) to dial such numbers.  The Court determined that the FCC’s efforts fell short of reasoned decision making, offering no meaningful guidance to affected parties.  As examples of why the FCC Ruling failed to satisfy the requirement of reasoned decision making, the Court noted the two conflicting positions taken by the FCC as to what functionalities are necessary for a device to qualify as an ATDS noting that at certain places in the Order, the FCC takes the position that a device qualifies as an ATDS only if it can generate random or sequential numbers to be dialed while in others, the FCC stated that a device qualifies as an ATDS even if it lacks that capacity.  The Court also noted that the FCC Order was unclear as to whether other certain referenced capabilities (for instance, dialing without human intervention) are necessary for a dialer to qualify as an ATDS.   

What Next? The Court’s refusal to sustain Order’s definition of an ATDS invalidates one of the most disturbing aspects of the 2015 Order but what does it mean for collection agencies and others who use ATDS to make non-telemarketing calls? Absent further rulemaking from the FCC, it will leave the issue open for judicial interpretation and we are likely to see additional litigation seeking to examine equipment on a device by device basis.  The Court’s decision contains some language which may prove helpful to the industry on the issue of what constitutes an ATDS - particularly its parsing of the issue as to functionality and the distinction drawn between the ability to generate random or sequential numbers and the ability to call from a database of numbers generated elsewhere.  It is likely that we will see this definition delved into in litigation to a further degree than previously seen.

Reassigned Numbers.

Regarding reassigned numbers, the court determined the FCC’s one call safe harbor was arbitrary and set it aside. The Court’s ruling was premised in large part upon the FCC’s own interpretation of the TCPA as allowing a caller’s reasonable reliance on prior express consent.  Recognizing that a caller’s reasonable reliance might not cease after one call or text message (for instance, when the recipient does not answer or provide any indication of reassignment), the Court held that there was no reasonable basis for the FCC to conclude that reasonable reliance would cease after the first call.  “Having embraced an interpretation of the statutory phrase ‘prior express consent’ grounded in conceptions of reasonable reliance, the Commission needed to give some reasoned (and reasonable) explanation of why the safe harbor stopped at the seemingly arbitrary point of a single call or message.” Id. at 38.  Importantly, the Court further held that the FCC’s failure regarding the one call safe harbor requires that the Court set aside its treatment of reassigned numbers generally.  As a result, the Court also set aside the FCC’s interpretation of a “called party” as referring to a new subscriber because to leave it in place would in turn “mean that a caller is strictly liable for all calls made to the reassigned number, even if she has no knowledge of the reassignment.”  Id. at 39.

What Next? While setting aside the FCC Ruling, the Court also signaled its agreement with other circuits (notably the Seventh and Eleventh) that the “called party” for purpose of the TCPA is intended to be the current subscriber.  The Court also seemingly embraced the reasonable reliance on prior express consent position espoused by the FCC.  As a result, it is likely we can anticipate a ramp up in reassigned number litigation centering around who is the “called party” and what constitutes reasonable reliance on prior express consent provided by the previous subscriber.  At the same time, the FCC (under new leadership) is already seeking to address the issue of reassigned numbers by looking at mechanisms to address the issue, including a repository of reassigned numbers.  In re Advanced Methods to Target and Eliminate Unlawful Robocalls, Second Notice of Inquiry, 32 FCC Rcd. 6007. 6010 (2017). 

 Revocation of Consent. 

As noted above, the Court sustained the FCC’s ruling that consent can be revoked through any reasonable means that clearly expresses a desire not to receive further messages.  Of note, the Court made clear that the FCC Ruling did not address revocation rules mutually adopted by contracting parties.  “Nothing in the Commission’s order thus should be understood to speak to parties’ ability to agree upon revocation procedures.” Id. at 43.

What Next?  Based upon the court’s clarification as to mutually adopted revocation rules, affected parties may wish to consider incorporating revocation procedures in their contracts with specific mechanisms for consumers to indicate their consent.  Based upon the Court’s ruling, affected parties should also continue to implement policies and procedures for recording revocations of consent.

Second Circuit Remains Firm That Flu Shot Reminders are Health Care Messages Under the TCPA

Following up on its decision in Latner v. Mount Sinai Health System, Inc., 2018 U.S. App. LEXIS 114 (2nd Cir. Jan. 3, 2018), the Second Circuit has again held that a flu shot reminder was a health care message under the TCPA. Zani v. Rite Aid Hdqtrs. Corp., 2018 U.S. App. LEXIS 4354 (2nd Cir. Feb. 21, 2018).

In Zani, the consumer filled a prescription at a Rite Aid pharmacy, provided his phone number and signed a Notice of Privacy Practices which provided that Rite Aid “may contact [Zani] to provide refill reminders or information about treatment alternatives or other health related benefits and services that may be of interest.” Zani at *2. Sometime later, Zani received a pre-recorded message from Rite-Aid’s vendor which stated:

Get your flu shot at Rite Aid today and shield yourself from this season's strains of the flu. Rite Aid now offers patients sixty five and over the Fluzone High Dose vaccine designed for older patients and covered by Medicare Part B. Because our immune systems may need more help as we get older, the Fluzone High Dose vaccine available at Rite Aid may deliver a stronger immune response. Come in today and shield yourself. No appointment necessary and most insurance plans accepted. Vaccines available while supplies last. See your Rite Aid pharmacist for details. Goodbye.

Zani at *3. Zani filed suit contending the message violated the TCPA. Rite Aid moved for summary judgment, contending the message was a health care message provided with the consumer’s prior express consent. The district court granted Rite Aid’s motion for summary judgment.

On appeal, both parties agreed that Zani had provided his prior express consent when he provided his cell number previously. Zani contended, however, because the message did not convey a health care message, express written consent was required and he had not provided it. The court disagreed, noting that its recent decision in Latner involved virtually identical issues. The court reiterated its decision in Latner holding that the message was a “health care” message exempt from the written consent requirements of the TCPA.

Second Circuit Holds Flu Shot Reminder Did Not Violate the TCPA

The Second Circuit has affirmed a lower court decision that a flu shot reminder sent by text message by a medical provider did not violate the Telephone Consumer Protection Act (the “TCPA”).  The decision is important because it interprets the 2012 FCC Healthcare Exemption as providing an exemption as to prior written consent rather than a wholesale exemption from consent.  Latner v. Mount Sinai Health System, Inc., 2018 U.S. App. LEXIS 114 (2^nd Cir. Jan. 3, 2018).

The limited record indicates that Mr. Latner visited Mt. Sinai in 2003 for a routine health examination.  At that time, he filled out new patient forms including a “New Patient Health Form” which contained his contact information, as well as an “Ambulatory Patient Notification Record” granting the hospital and its facilities consent to use his health information “for payment, treatment and hospital operations purposes.”  In 2011, Mr. Latner visited Mt. Sinai again and declined any immunizations.  In 2014, Mt. Sinai, through a third-party vendor, sent Mr. Latner the following text message: “Its flu season again.  Your PCP at WPMG is thinking of you! Please call us at 212-247-8100 to schedule an appointment for a flu shot…”  Latner at *3.  The message was sent to all active patients, including Mr. Latner, that had visited the office in the three years prior to the date of the text.

Mr. Latner filed a putative class action, alleging that the text message violated the TCPA.  The hospital moved for judgment on the pleadings and asserted, as an affirmative defense, Mr. Latner’s prior express consent. Latner, 1:16-cv-00683 (S.D.N.Y.), Dkt. No. 42. 

In affirming the district court’s ruling, the Second Circuit did a two-step analysis.  It first determined whether the communication was covered by the 2012 FCC Healthcare Exemption and secondly, determining whether Mr. Latner had provided effective consent. 

The Second Circuit concluded that the communication was covered by the 2012 FCC Healthcare Exemption.  Under the 2012 FCC Telemarketing Rule, prior written consent is required for autodialed or prerecorded telemarketing calls.  The Rule, however, contains an exemption for covered healthcare providers in certain instances.  The court determined that the Healthcare Exemption exempts from written consent “calls to wireless cell numbers if the call ‘delivers a ‘health care’ message made by, or on behalf of, a ‘covered entity’ or its ‘business associate’ as those are defined in the HIPPA Privacy Rule.”  “HIPPA defines health care to include ‘care, services, or supplies related to the health of an individual’… and exempts from its definition of marketing all communications made ‘[f]or treatment of an individual by a health care provider… or to direct or recommend alternative treatments’ to the individual.” Id. at *5.  Both the district court and the Second Circuit concluded that the text message qualified for the FCC’s Healthcare Exemption.

The Second Circuit then moved to the issue of prior express consent and reviewed the terms of the consent provided by Mr. Latner in his 2003 consent forms.  Of particular importance to the court, the forms provided consent to use Latner’s information “to recommend possible treatment alternatives or health-related benefits and services.” Id. at *6-7.    The court concluded that the language of the forms therefore provided prior express consent to receive text messages concerning a “health related benefit” such as a flu shot.

The opinion is important for a few reasons.  First, it clarifies that the Healthcare Exemption only exempts covered communications from written consent and is not a wholesale exemption as to consent. Secondly, the opinion emphasizes the importance of carefully worded consent provisions.  All business verticals which use automated messaging, calls or text messages should review their intake documents to ensure that consent is properly addressed as to the scope of any contemplated telecommunications and then should again review any contemplated mass communications prior to being made in light of their consent documents.  Finally, the opinion notes by footnote that the text message (which was sent in 2014) was not covered by the FCC’s 2015 Healthcare Treatment Exception because “there is no language in the 2015 FCC order suggesting any intent to make the Exception retroactive, much less justification for any asserted retroactivity, precluding its application in this instance.” Id. at FN 2.

Guest Post: District Court Rejects Vicarious Liability Claims under the TCPA

By Alexa Cannon

A Michigan district court recently weighed in on the availability of vicarious liability for violations of the Telephone Consumer Protection Act (the “TCPA”). In Kern v. VIP Travel Servs., the plaintiffs received several dozen telephone calls from United Shuttle Alliance Transportation Corp. (“USA”). Kern v. VIP Travel Servs., 2017 U.S. Dist. LEXIS 71139 (W.D. Mich. 2017). The calls were made over a three month span to cell phones which were registered on the national do-not-call registry. When answering the calls, plaintiffs heard an automated voice telling them, “Pack your bags! You’ve won a Disney Vacation!” Id. at *3. The voice directed the plaintiffs to press 1 to reach a representative in order to reserve a date at various vacation resorts of their choosing. After plaintiffs spoke to a representative, they were directed to a website in order to purchase the packages at a discounted rate. Plaintiffs made reservations to stay at three resorts and received emails from the resorts confirming their reservations.

Plaintiffs contended that the telephone calls made by USA violated the TCPA, and that the resorts were vicariously liable for the calls. Examining the vicarious liability of the resorts, the court first noted that “[a]n entity may be vicariously liable for TCPA violations ‘under a broad range of agency principals.”  Id. at *16.  The court then went on to examine the claims against the resorts under principles of actual authority, apparent authority, and ratification.

Actual Authority

In reviewing the plaintiffs’ claims as to actual authority, the court focused its analysis on the resorts’ rights to control the agent’s actions. Id at *17. When analyzing the facts here, the court determined there was nothing in the complaint that created a reasonable inference that the resorts had the right to control USA. The court noted that even if the resorts contracted with USA to solicit customers, this was not enough to establish that the resorts had the right to control USA. Id. at *19. The court therefore concluded there was no supporting evidence to prove that USA reasonably believed that the resorts had given it authority to make calls which violated the TCPA, thus actual authority was nonexistent.

Apparent Authority

The court next turned its attention to the plaintiffs’ assertion that USA had apparent authority on behalf of the resorts to make calls which violated the TCPA. Here, the court focused on whether the resorts had held USA out to third parties as possessing sufficient authority to commit the particular act in question. Id. at *19. The court ruled that there were no well-pleaded allegations to suggest the resorts gave USA access to detailed information about their vacation packages, or gave USA to authority to enter customer information into Resort’s database. The court reasoned that although USA knew the price of the vacation packages, the duty rested on the Plaintiffs to confirm their reservations because USA could not finalize the transaction. In short, the court concluded that the plaintiffs’ apparent authority argument failed because the resorts never “held out” USA as possessing sufficient authority to make the violative calls.

Ratification

Lastly, the court examined the plaintiffs’ argument that the resorts should be held vicariously liable due to their ratification of USA’s actions. The court took issue with plaintiffs’ ratification argument and noted that the complaint did not provide the court with any reasonable inference that the resorts were aware of USA’s unlawful calls. Therefore, the resorts never affirmed USA’s actions.

Rejecting the Plaintiffs’ vicarious liability argument, the court rendered a dismissal for both resorts. The opinion should be welcomed by defense counsel defending TCPA violations as it provides guidance to the extent at which vicarious liability can hold a party liable under federal common law agency principles for a TCPA violation by a third  party telemarketer.

 

About the Author.  Alexa Cannon is a rising third year law student at Campbell University and is a summer law clerk with Smith Debnam Narron Drake Saintsing & Myers, LLP.

Ninth Circuit Weighs in on Prior Express Consent and Revocation of Consent

The Ninth Circuit recently weighed in on the limitations of prior express consent and revocation under the Telephone Consumer Protection Act (the “TCPA”).  In Van Patten v. Vertical Fitness Group, LLC, the consumer provided his cell number when meeting with a fitness gym about joining.  Van Patten v. Vertical Fitness Group, LLC, 2017 U.S. App. LEXIS 1591 (9^th Cir. Jan. 30, 2017.  The gym was owned by the defendant but was operated as a Gold’s Gym franchise.  Shortly after joining, the plaintiff cancelled his membership and moved to California, but kept his cell number.  After a brand change, the defendant worked with its marketing partner to announce the change of brand and invite former members to return.  The plaintiff received two text members from the defendant as part of this marketing campaign and filed a putative class action asserting the text messages violated the TCPA.

The district court granted the defendants’ motions for summary judgment and the plaintiff appealed.  In reviewing the TCPA claims, the court first determined that the plaintiff had standing under Article III.  In doing so, the court held that the plaintiff had established the concrete injury-in-fact necessary to pursue his TCPA claim.  The court held that “[t]he TCPA establishes the substantive right to be free from certain types of phone calls and texts absent consumer consent.  Congress identified unsolicited contact as a concrete harm, and gave consumers a means to redress this harm.  We recognize that Congress has some permissible role in elevating concrete, de fact injuries previously inadequate in law “to the status of legally cognizable injuries.”  Id. at *10-11.  The court distinguished Spokeo by noting that Spokeo dealt with a procedural requirement which might not actually case actual harm while the telemarketing messages at issue in this case, absent consent, presented the precise harm the statute was enacted to protect against.

Moving on to the merits of the TCPA claims, the court looked at two issues: prior express consent and revocation of consent.  As most know, prior express consent is an affirmative defense to TCPA claims and is not defined within the statute.  The court therefore turned to the FCC interpretation of prior express consent in its prior rulings and orders.  Relying in part on the FCC’s prior orders discussing the scope of prior express consent, the court concluded that “an effective consent is one that relates to the same subject matter as is covered by the challenged calls or text messages.”  Id. at *14.    In doing so, the court did not read the 1992 FCC Order to mean that by providing a cell number, a consumer consented to be contacted for any purpose whatsoever.  Instead, the court read it to be more restrictive, holding that transactional context matters in determining a consumer’s consent to contact.  Applying its conclusion to the facts in the case before it, the court concluded that the consumer had provided express consent to be contacted about reactivating his gym membership.  In giving his phone number for the purpose of his gym membership agreement, the plaintiff “gave his consent to be contacted about some things, such as follow-up questions about his gym membership application, but not to all communications.  The scope of his consent included the text messages’ invitation to ‘come back’ and reactivate his gym membership.”  Id. at *19.

Having concluded that the plaintiff had provided his prior express consent to receive the text messages, the court turned its attention to the plaintiff’s argument that by cancelling his gym membership, he had effectively revoked his consent to be contacted.  The court, while acknowledging consent can be revoked, concluded that revocation of consent “must be clearly made and express a desire not to be called or texted.”  Id. at *23-24.   The court concluded that plaintiff, in cancelling his gym membership, did not clearly express his desire not to receive further text messages.   The court therefore affirmed the lower court’s ruling.

The opinion should be welcomed by defense counsel defending TCPA actions in the Ninth Circuit as it provides a fairly expansive interpretation of prior express consent while setting a restrictive view on revocation of consent.