TCPA Connect

A Winner for the Defense

By Diana L. Eisner, Associate, Litigation

Judge Padova in the Eastern District of Pennsylvania recently granted a motion by Kohl’s to dismiss a putative Telephone Consumer Protection Act class action for lack of standing in Winner v. Kohl’s, finding that texting a specific opt-in code after viewing a “call to action” satisfied the TCPA’s prior express written consent (PEWC) requirement.

In 2014, Winner saw a call-to-action in a Kohl’s store, texted the call-to-action keyword “APP,” received a response with information about the Kohl’s app (and stating she’d receive two or three autodialed messages) and then received a second message inviting her to text “Save30” for other coupons. Winner then opted into the mobile alerts program by texting “Save30,” and she began getting alerts. She claimed she repeatedly asked for the messages to stop, including asking an employee in the store. The in-store employee was unable to help. Finally, Winner texted “stop” to Kohl’s and the messages stopped. The second plaintiff, Jennings, also texted a call to action in 2014 and began receiving messages, but did not claim she revoked consent. 

Plaintiffs claimed, among other things, that they were never “clearly and conspicuously informed they were enrolling in automated” marketing messages and Kohl’s never obtained PEWC. Winner also claimed she revoked consent. The parties stipulated to certain facts, including the language at the bottom of the calls to action, which stated that autodialed marketing messages would be sent, and consent was not a condition of purchase. The disclosures were contained at the bottom of the call to action, in fairly small font compared with the rest of the text.

Kohl’s moved to dismiss based on lack of standing, arguing that because both plaintiffs consented to receive the messages, they could show no concrete injury.

Judge Padova agreed, finding that both “expressly consented” to receive the marketing messages and provided PEWC. While the court cited Spokeo, the decision is grounded on more general standing principles, and is not specific to the Spokeo “bare procedural violation” holding. The court found the disclosures Kohl’s used sufficient to satisfy the standard for PEWC as they stated that (1) by opting in the customer “will receive two to three auto-dialed text messages” to set up their participation; (2) “Participation is not required to make a purchase;” (3) customers could “Reply HELP for help, reply STOP to cancel;” (4) message and data rates may apply; and (5) the terms and conditions of the program were available on Kohl’s website.

The court also noted the sequence of the messages to both plaintiffs—both sent an opt-in text to Kohl’s before Kohl’s sent any text message. Importantly, the “written agreement” was in the form of the text message Winner received after texting “APP,” which included a disclosure that she would receive five to seven texts a month and incorporated by reference the terms and conditions of the program by including a link to Kohl’s terms and conditions. The terms and conditions contained PEWC disclosures, including that consent was not required as a condition of purchase.

After disposing of plaintiffs’ lack of consent claim, the court made quick work of Winner’s revocation claim. The court noted that Winner did not specify how she tried to revoke consent, except her request to a store employee. Importantly, the court found this action “did not comply with the terms and conditions of the program,” which required texting “STOP” to opt out, and was thus insufficient to establish an injury-in-fact. Moreover, once Winner texted “STOP,” the messages stopped.

Finally, the court rejected the plaintiffs’ argument that only one text was permitted based on the 2015 FCC order, essentially arguing their request was for a one-time message. First, the court recognized the opt-ins were received before the 2015 FCC order was issued, and thus it didn’t apply to the call to action. Substantively, the court found that more than one text is permitted where PEWC is received, which it was in this case.

Why it matters: The opinion out of the typically plaintiff-friendly Third Circuit is a win for retailers, as it shows that even plaintiff-friendly jurisdictions seem to be taking a hard look at manufactured TCPA claims. The decision also indicates that PEWC disclosures can be incorporated into a call to action by reference to a marketer’s terms and conditions (however, here they were also contained on the in-store call to action). And it also shows that despite the 2015 FCC order on revocation, not following clear instructions for opting out is unreasonable and thus cannot be the basis for a claim. Finally, the decision underscores the importance of properly crafted and compliant text marketing campaigns, including proper language in terms and conditions.

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Surprising Results for U.S. Chamber Statistics on TCPA Cases

By Christine M. Reilly, Chair, TCPA Compliance and Class Action Defense

During a 17-month period after the Federal Communication Commission’s July 2015 order, the U.S. Chamber Institute for Legal Reform compiled a database of 3,121 Telephone Consumer Protection Act cases filed between Aug. 1, 2015, and Dec. 31, 2016, to examine the trends of TCPA litigation.

The U.S. Chamber found that TCPA litigation has increased 46% since the FCC’s July 2015 declaratory ruling and more than 30% of the cases brought are class actions. The litigation also has a widespread reach across various industries and geographical regions. Of the industries that have been targeted, the financial industry has been hit hardest. Of the cases filed, 36% have been brought against banks and other financial entities, followed by the collections industry with 18% of the cases. Other industries that have been targeted in TCPA litigation include healthcare (8.4%), retail (7.1.%), education (6.6%), marketing (2.3%) and the auto industry (2.2%). The increase in the number of cases filed also showed a trend of repeat players and professional plaintiffs in the space, with 60% of the cases filed by only 44 law firms. The most prolific filer of TCPA lawsuits was the Law Firm of Todd Friedman in Los Angeles, which filed 263 lawsuits, most of which were filed as class actions. Morgan & Morgan in Florida followed with 235 suits, and then Lemberg Law in Connecticut with 107 suits.

The geographic span of TCPA cases has also greatly expanded. Traditionally, TCPA cases were concentrated mainly in California, Illinois and Florida, but 40% of the litigation during the examined time period was brought outside of those three states. The sample spanned 42 states, with the top ten states accounting for nearly 90% of the cases filed. While California, Florida and Illinois still remain the top three states for TCPA litigation, the growing list of states now includes Georgia, New Jersey, New York, Texas, Pennsylvania, Tennessee, Missouri and Ohio.

Findings show that most TCPA cases end in settlements. The top ten TCPA settlements were between $23 million and $76 million, and 50% of the top ten settlements were made in the Northern District of Illinois. Half involved banks or financial entities—Capital One settled for $75 million, HSBC Bank for $40 million, Bank of America for $32 million, Wells Fargo for $30.4 million and Metropolitan Life Insurance for $23 million. Together, the financial services settlements are valued at over $200 million.

To read the study in U.S. Chamber Institute for Legal Reform’s TCPA Litigation Sprawl, click here.

Why it matters: The U.S. Chamber’s study shows an explosion of TCPA litigation since July 2015, when the FCC issued a major declaratory ruling. TCPA litigation continues unabated as businesses across a variety of industries and states face TCPA lawsuits, which may result in staggering settlements. Thus, compliance continues to be an essential part of any consumer outreach program.

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No Sender Liability Where Fax Merely References Defendant’s Products

By Christine M. Reilly, Chair, TCPA Compliance and Class Action Defense | Diana L. Eisner, Associate, Litigation

Mere reference to products on a fax sent by a third party does not trigger liability under the Telephone Consumer Protection Act (TCPA), a federal court in Michigan has ruled, dismissing an action against two pharmaceutical companies.

In August 2016, Mohawk, Inc., sent multiple faxes to Health One Medical Center advertising several pharmaceutical products. The faxes promoted various drugs, listing the item number, description, regular price and discounted price. Each fax had Mohawk’s name, address, website and email address on it, and to order the drugs, the customer was directed to fax, call or email Mohawk.

Health One filed a putative class action lawsuit against Mohawk as well as Bristol-Myers Squibb Co. and Pfizer, Inc., both of which had drugs promoted in the faxes. The plaintiff claimed that the pharmaceutical companies “sent the faxes, caused the faxes to be sent, participat[ed] in the activity giving rise to or constituting the violation, or the faxes were sent on its behalf.”

Both Bristol-Myers and Pfizer moved to dismiss the suit, arguing that Health One failed to state a claim under the TCPA. They couldn’t be liable under the statute because the plaintiff alleged no facts showing any action or inaction by the pharmaceutical companies, a business relationship with Mohawk, participation in the creation or transmission of the faxes, or even awareness by the companies of Mohawk and the fact it was selling their products.

Siding with the defendants, the court granted the motion to dismiss.

Beginning its analysis with Pfizer, the court said Health One’s allegation that the company actually sent the fax failed because the plaintiff also claimed Mohawk sent the faxes.

The faxes “include references only to Mohawk, Inc. and instruct the recipient to contact Mohawk, Inc., not Pfizer, Inc.,” U.S. District Court Judge Judith E. Levy wrote. “And other than the allegation that Pfizer, Inc. sent the fax, plaintiff offers no other allegations or facts to justify this allegation. Collectively, the conclusory allegations by plaintiff, undermined by the plain text and images of the faxes, do not plausibly suggest that Pfizer, Inc. played a role in sending the faxes.”

Nor did Health One allege any action or relationship between the defendants that would raise an inference that Pfizer knew Mohawk was sending the faxes, leaving the court unable to find the company caused the faxes to be sent or participated in the activity giving rise to or constituting the violation, or that the faxes were sent on its behalf.

The plaintiff advocated for a broad interpretation of the TCPA, which states that a “sender” who may be liable for violations of the statute includes “the person or entity … whose goods or services are advertised or promoted in the unsolicited advertisement.” Simply by alleging that Pfizer’s products were listed on the fax, Health One told the court it had sufficiently pled a case against the pharmaceutical company.

The court disagreed. It distinguished cases relying on this language, pointing out that the defendants in the prior case law acknowledged a relationship with the sender. In the case at hand, Health One had not alleged the defendants “had any knowledge of, relationship with, or contact with Mohawk, Inc.,” the court said.

While the U.S. Court of Appeals for the Sixth Circuit has not addressed “whether an advertisement that includes an entity’s products is sufficient for that entity to be liable as a sender,” both an Ohio federal court and the Seventh Circuit have rejected this reading of the regulation, Judge Levy wrote, as it would lead to “absurd and unintended result.”

“The reasoning of these cases is persuasive, and plaintiff’s expansive reading of the statute in this case is not justified,” the court said. “Accordingly, plaintiff’s allegation that Pfizer’s product is listed on the faxes is insufficient to sustain the TCPA claim.”

As for Bristol-Myers, the court agreed that it lacked personal jurisdiction over the company because Health One failed to state a prima facie case that the causes of action arose out of the defendant’s contacts with Michigan. Even assuming that the court had personal jurisdiction, however, “the analysis as to whether Pfizer, Inc. violated the TCPA and is liable” would be equally applicable to Bristol-Myers.

To read the opinion and order in Health One Medical Center Eastpointe v. Bristol-Myers Squibb Company, click here.

Why it matters: The contours of who is a “sender” under the TCPA continue to evolve through case law but, for now, are still a murky area. While this case is a win for the defense, the plaintiff has already filed notice of appeal to the Sixth Circuit. If the federal appellate panel agrees to hear the case, it could seize the opportunity to join with the Seventh Circuit to reject the plaintiff’s broad reading of the statute that a mere reference to a product in an allegedly infringing advertisement results in liability under the TCPA.

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Spoofed Robocalls Yield Another Multimillion-Dollar Fine From FCC

By Christine M. Reilly, Chair, TCPA Compliance and Class Action Defense | Diana L. Eisner, Associate, Litigation

Citing more than 21 million illegal calls, the Federal Communications Commission proposed an $82 million fine against Best Insurance Contracts, Inc., and owner Philip Roesel.

The agency was tipped off to the defendants’ activity by an informal complaint filed by an entity that provides paging services for hospitals, emergency rooms and physicians. The company notified the FCC of “a significant robocalling event” that was disrupting its emergency medical paging service.

Tracing the calls led to Roesel, who sells insurance plans and does business under the name Best Insurance Contracts. Through his own name and through BIC, Roesel generated insurance sales leads by making unsolicited robocalls to consumers in which he advertised the insurance products he sold, according to the agency’s Notice of Apparent Liability for Forfeiture.

The agency subpoenaed Roesel’s call records over a three-month period from Oct. 23, 2016, to Jan. 23, 2017. During this time period, Roesel and/or BIC made 21,582,771 calls, averaging over 200,000 calls per day, the FCC said, and violated both the Truth in Caller ID Act and agency rules.

Commission staff analyzed a sample of 82,106 robocalls the defendants made using four specific numbers. All the calls made that displayed one of these four numbers in the called parties’ caller IDs were not assigned to Roesel and were therefore spoofed, the agency found. The FCC also matched dozens of consumer complaints to the call records of robocalls made by Roesel.

“We find that Philip Roesel (directly or through BIC) apparently violated Section 227(e) of the Act and Section 64.1604 by knowingly causing the display of misleading or inaccurate called ID information, or ‘spoofing,’ with unlawful intent, for the purpose of aiding an illegal robocalling campaign,” the FCC alleged.

“[S]poofing, when done in conjunction with an illegal robocalling campaign (itself a harmful practice), indicates an intent to cause harm,” the agency said. In addition, the FCC had evidence of Roesel’s actual intent to violate the law.

A whistleblower told the agency that Roesel was “well aware” that his activities were illegal, telling his workers that robocalls were “a minor violation akin to driving above the speed limit.” Roesel also targeted “some of the most vulnerable members of society” for his robocalling campaign, instructing the whistleblowing employee that “the goal was to market to economically disadvantaged and unsophisticated consumers … ‘the dumber and more broke, the better.’”

Not only did the defendants’ spoofed robocall campaigns cause “significant consumer harms,” they also resulted in a major disruption to the paging network for medical service providers, the FCC said, and effectively rendered the numbers the network used unsuitable for assignment to any legitimate subscriber.

Turning to the appropriate forfeiture for Roesel’s more than 21 million spoofed telemarketing robocalls, the court looked to its recent action in In the Matter of Abramovich for guidance. In that case, the FCC proposed a $120 million fine against an individual who used “neighbor spoofing” to make more than 96 million robocalls over a three-month period.

The agency applied a $1,000 base forfeiture to each of the 82,106 spoofed calls verified by the FCC for a total of $82,106,000. The FCC then determined the facts did not warrant an upward adjustment, distinguishing Abramovich for the “fraudulent activities that were at the heart” of the robocalling campaign and noting it was the first time Roesel has run afoul of the law.

“While not as egregious as the apparent spoofing in Abramovich, it appears that Philip Roesel is highly culpable; the records show that the calls were made both by Philip Roesel in his personal capacity as well as in the name of the BIC,” the FCC wrote. “Moreover, the sheer volume of calls—21,582,771 calls in a three-month period—are egregious in number. On balance, we find that neither an upward adjustment nor a further downward adjustment to the proposed base forfeiture of $82,106,000 is necessary to punish misconduct and deter future wrongdoing.”

The agency also determined that Roesel was personally liable for the proposed forfeiture, as BIC merely functioned as an instrumentality of Roesel, and he “cannot be allowed to circumvent personal liability simply by forming a corporate entity to hide behind.”

To read the Notice of Apparent Liability for Forfeiture in In the Matter of Best Insurance Contracts, Inc., click here.

Why it matters: What is the message from the FCC with regard to spoofed robocalls? “We will do everything in our power to put you [robocallers] out of business,” Chair Ajit Pai wrote in his statement accompanying the Notice of Apparent Liability, the second multimillion-dollar forfeiture in three months from the agency. The FCC also noted that even though the two actions began with a forfeiture based on the total number of verified spoofed robocalls, “we reserve the right in the future, especially with large scale spoofing violations, to use the total number of calls made where there is a high likelihood of violations based on the use of a representative sampling of calls.”

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Ninth Circuit: Telemarketers Not Agents, No TCPA Liability

By Christine M. Reilly, Chair, TCPA Compliance and Class Action Defense | Diana L. Eisner, Associate, Litigation

Considering vicarious liability under the Telephone Consumer Protection Act (TCPA), the U.S. Court of Appeals for the Ninth Circuit weighed the ten nonexhaustive factors found in the Restatement (Second) of Agency to hold that the telemarketers at a marketing vendor company were acting as independent contractors and not agents of the defendant.

Royal Administration Services sells vehicle service contracts—a promise to perform or pay for certain repairs or services on a car—through automobile dealers and marketing vendors. One of Royal’s 20 different marketing vendors was All American Auto Protection, which sold VSCs for many companies.

AAAP’s telemarketers would place a call and first sell a consumer on the concept of a VSC before selecting a particular service plan from one of its many vendors. Royal and AAAP entered into an agreement in October 2011. AAAP was authorized to sell Royal VSCs and promised not to violate any state or federal law, including the use of illegal robocalls.

Two consumers living in Nevada whose telephone numbers are both listed on the National Do Not Call Registry alleged they received multiple calls from AAAP and filed suit, asserting violations of the TCPA. After a default judgment was entered against AAAP and the company filed for bankruptcy protection, the plaintiffs amended their complaint to add Royal as a defendant, contending the company was vicariously liable for the calls under the statute.

Royal filed a motion for summary judgment, arguing that it could not be liable for AAAP’s calls. A district court judge agreed, but the plaintiffs appealed. After considering whether the plaintiffs established an agency relationship between Royal and AAAP as defined by federal common law, the Ninth Circuit affirmed.

Noting the “essential ingredient” in the relationship is the extent of control exercised by the principal, the panel adopted the nonexhaustive list of ten factors of the Restatement (Second) of Agency to guide the determination of whether an individual providing services for a principal is an agent or an independent contractor:

“1) the control exerted by the employer, 2) whether the one employed is engaged in a distinct occupation, 3) whether the work is normally done under the supervision of an employer, 4) the skill required, 5) whether the employer supplies tools and instrumentalities [and the place of work], 6) the length of time employed, 7) whether payment is by time or by the job, 8) whether the work is in the regular business of the employer, 9) the subjective intent of the parties, and 10) whether the employer is or is not in the business.”

“Applying these factors, we find AAAP and its telemarketers were not acting as Royal’s agents when they placed the calls at issue in this case,” the Ninth Circuit concluded.

The panel acknowledged that Royal exercised “some amount” of control, as AAAP was required to keep records of its interactions with consumers who purchased Royal VSCs, send Royal weekly reports on VSC sales, and provide notice of requests to cancel Royal VSCs. Royal also mandated that AAAP implement security measures to protect consumer data and required that AAAP telemarketers use only scripts and materials approved by Royal when selling its products.

“However, Royal did not have the right to control the hours the telemarketers worked nor did it set quotas for the number of calls or sales the telemarketers had to make,” the court said. “Thus, Royal had only limited control of AAAP’s telemarketers. Significantly, Royal did not have any control of a telemarketer’s call until the telemarketer decided to pitch a Royal VSC to the consumer.”

Further, the complaint alleged that one of the consumers was pitched a “Diamond New Car” VSC—a plan not sold by Royal through AAAP. “Thus, there is no evidence that AAAP telemarketers ever tried to sell Royals VSCs to Appellants,” the court said. “Accordingly, Royal never specifically controlled any part of any of the calls at issue in this case.”

Second, AAAP was an independent business, separate and apart from Royal, and engaged in the “distinct occupation” of selling VSCs through telemarketing, with many different clients. This factor “strongly suggests” the telemarketers were independent contractors and not employees, the court said, as did the third factor, that the calls made by AAAP’s telemarketers were not normally done under the supervision of Royal.

The record contained no evidence regarding the skill required to make the telemarketing calls, leading the Ninth Circuit to skip this factor. Royal provided AAAP some tools and instrumentalities necessary to complete the sales (such as limited training and scripts for sales pitches), but “AAAP provided far more tools and instrumentalities, including its own phones, computers, furniture, and office space,” the court said, further supporting the finding of independent contractor status.

Weighing the sixth factor, the panel noted the original contract between the parties was set to last only one year. Although it was extended to last a total of three years, the limited nature of the original contract demonstrates there was a contemplated end to the relationship, the court said. AAAP was paid a commission for each sale of a Royal VSC, rather than for the time its telemarketers worked, both factors indicating an independent contractor relationship.

The eighth factor weighed in favor of an agency relationship, however, as Royal specifically contracted out all its direct sales to different vendors and AAAP’s sales were a regular part of its business. Tipping the ninth factor away from agency status, AAAP sold VSCs for multiple companies, indicating its intent to have its telemarketers operate as independent contractors for many different companies, the court said. Finally, Royal is a business, which favored an agency relationship.

“Taking these factors into account, it is clear that AAAP’s telemarketers were independent contractors rather than agents,” the panel wrote. “AAAP was its own independent business that sold VSCs for multiple companies without the direct supervision of a Royal employee. AAAP provided its own equipment, set its own hours, and only received payment if one of its telemarketers actually made a sale. Finally, although Royal had some control over AAAP’s telemarketers, it did not specifically control the calls at issue in this case, because the telemarketers never attempted to sell a Royal VSC during those calls. Because AAAP’s telemarketers were independent contractors, rather than Royal’s agents, Royal cannot be held vicariously liable for any calls the telemarketers made in violation of the TCPA.”

To read the opinion in Jones v. Royal Administration Services, Inc., click here.

Why it matters: An independent contractor gone rogue is a familiar backdrop for TCPA cases. This decision should help companies defend these types of claims and underscores that the “essential ingredient” for vicarious liability is control. Thus, a business should carefully consider its agreements and relationships with independent contractors who engage in marketing to ensure the business is shielded from TCPA liability for the acts of the independent contractor. 

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Oral, Partial Revocation Valid Under TCPA, Eleventh Circuit Rules

By Christine M. Reilly, Chair, TCPA Compliance and Class Action Defense | Diana L. Eisner, Associate, Litigation

Consent can be partially revoked pursuant to the Telephone Consumer Protection Act (TCPA), the U.S. Court of Appeals, Eleventh Circuit recently held.

Emily Schweitzer provided Comenity Bank with her cellphone number when she applied for a credit card. In 2013, when she failed to make required payments on the account, Comenity began placing calls to her cellphone concerning the delinquency.

On Oct. 13, 2014, a Comenity employee called Schweitzer, told her she was two payments behind on her account and asked if she could make a $35 payment. Schweitzer responded: “Unfortunately I can’t afford to pay right now. And if you guys cannot call me, like, in the morning and during the work day, because I’m working, and I can’t really be talking about these things while I’m at work. My phone’s ringing off the hook with you guys calling me.”

A few months later, on March 19, 2015, a different Comenity employee called Schweitzer about her still past-due account. Twice during the conversation, Schweitzer asked for the calls to stop. For example, she said: “Can you just please stop calling me? I’d appreciate it, thank you very much.”

Comenity did not place any more automated calls to Schweitzer’s phone after this conversation, but she filed suit against the bank for violations of the TCPA. She claimed that during the Oct. 13 conversation, she revoked her consent to have Comenity make calls to her cellphone and that despite her revocation, the bank made more than 200 automated calls through March 2015.

A district court judge granted Comenity’s motion for summary judgment, writing that Schweitzer didn’t define or specify the parameters of the times she did not want to be called and that no reasonable jury could find she revoked her consent to be called.

On appeal, the Eleventh Circuit reversed.

“The TCPA allows a consumer to partially revoke her consent to receive automated calls, and there is an issue of material fact as to whether Ms. Schweitzer’s statements during the October 13 conversation constituted a revocation of consent to be called in the morning and during the work day,” the court said.

Comenity argued that the TCPA does not permit partial revocations of consent and only allows for unequivocal requests for no further communications whatsoever.

Although the statute itself is silent on the issue of revocation, the panel looked to a 2014 decision where it held that a consumer may orally revoke her consent to receive automated phone calls, inferring that Congress intended for the TCPA to incorporate the common-law understanding of consent.

At common law, consent is a willingness for certain conduct to occur, and such willingness can be restricted or limited, the court explained, so that if an actor exceeds the consent provided, the permission granted does not provide protection from liability. Support for this position can be found in other areas of federal law, such as the federal wiretapping statute (where a person can agree to having only certain calls being recorded) and the Fourth Amendment, which allows a person to provide limited consent to a search.

“We therefore conclude that the TCPA allows a consumer to provide limited, i.e., restricted, consent for the receipt of automated calls,” the Eleventh Circuit wrote. “It follows that unlimited consent, once given, can also be partially revoked as to future automated calls under the TCPA. … Our conclusion is supported by the maxim that the greater power normally includes the lesser. We think it logical that a consumer’s power under the TCPA to completely withdraw consent and thereby stop all future automated calls, encompasses the power to partially withdraw consent and stop calls during certain times.”

The panel was not persuaded by the bank’s contention that partial revocation might present logistical and technical challenges, as the “potential for such complications … is not enough to limit a consumer’s powers under the TCPA.”

Turning to whether Schweitzer’s statement on Oct. 13 constituted a partial revocation of consent under the statute, the court found it “close” but allowed the suit to move forward. “A jury could certainly find that Ms. Schweitzer … was too equivocal, but we do not think that the lack of specificity is fatal to her claim of partial revocation,” the court said.

The plaintiff’s references to “the morning” and “the work day” can be understood in the context of a customer trying to get a creditor not to call her at certain times of the day, the panel said, emphasizing that the “meaning of language is inherently contextual.” The court also noted that Comenity employees testified that they understood what Schweitzer meant by her request and did not need to ask her for clarification.

“We believe a reasonable jury could conclude that Ms. Schweitzer did not want automated calls in the several hours between the time one wakes up and goes to school or work (say the couple of hours from 6:00 or 7:00 a.m. to 8:00 or 9:00 a.m.), or during a typical work day (say the eight hours from 8:00 or 9:00 a.m. to 4:00 or 5:00 p.m.),” the court wrote. “Under the TCPA, a consumer may partially revoke her consent to receive automated phone calls. The ‘issue of consent is ordinarily a factual issue,’ and here summary judgment was inappropriate because a reasonable jury could find that Ms. Schweitzer partially revoked her consent to be called in ‘the morning’ and ‘during the workday’ on the October 13 phone call with a Comenity employee.”

To read the opinion in Schweitzer v. Comenity Bank, click here.

Why it matters: Partial revocation by a consumer presents many practical and technical hurdles for businesses, as well as potential evidentiary challenges. While Comenity Bank requested rehearing en banc by the Eleventh Circuit, arguing that the panel decision conflicts with prior rulings, TCPA plaintiffs will no doubt seize upon this ruling to support claims based on spotty revocation. Companies should take this opportunity to review their policies on honoring requests for calls to stop and consider whether new policies should be enacted to cover partial revocation, like that in this case.

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No Class Certification After Oral Consent

By A. Paul Heeringa, Counsel, Financial Services Group

A recent ruling by the U.S. District Court for the Northern District of Illinois in favor of a group of “pet insurance” defendants who allegedly made unsolicited advertising calls to over 300,000 cellphones arguably suggests that (1) oral consent not only may be a defense to Telephone Consumer Protection Act (TCPA) liability but also may defeat class certification under Fed. R. Civ. P. 23 and (2) lack of standing under Spokeo may likewise defeat class certification.

In Legg v. PTZ Ins. Agency, Ltd., No. 14 C 10043, 2017 WL 3531564 (N.D. Ill. Aug. 15, 2017), the defendants offered consumers products and services relating to pet adoption and insurance. The product/service at issue was a 30-day “free gift” of pet health insurance offered to pet adopters through the defendants’ “partner” animal shelters. To receive the free gift, the adopters had to submit, in the adoption paperwork, a valid email address and an opt-in to receive emails from the defendants. More specifically, the adoption paperwork—which required the adopter to give his or her name, address, and email and telephone information—provided that (1) unless adopters opted out, they may be sent “special offers by mail or email relating to other products or services that may also be of interest” and (ii) their personal information may also be shared with third parties so that they could contact adopters “by mail or email for their own marketing purposes.” Although the opinion is not entirely clear, the paperwork apparently did not mention calls (landline or cellphone) or text messages.

The plaintiff alleged that, after completing the adoption paperwork, the putative class members (adopters) received two emails from the defendants reminding them of their “free gift” as well as two alleged prerecorded robocalls also reminding them of the “gift.” Discovery revealed that the prerecorded calls were sent to at least 341,288 unique cellphone numbers, which was the basis of the plaintiff’s underlying TCPA claim.

The district court first walked through the requirements of Fed. R. Civ. P. 23(a)—numerosity, commonality, typicality and adequacy of representation—and found that the plaintiff had met all of them. Turning to the “predominance” requirement of Rule 23(b)(3), however, the district court agreed with the defendants’ argument that individualized questions of consent predominated over any common questions and, consequently, denied the plaintiff’s class certification bid.

In essence, the defendants argued that (1) during the adoption process adopters agreed to receive communications from defendants, were “told” and had agreed and expected to receive such communications by phone in addition to email, even though the agreement to receive calls was not in writing; (2) as such, the case centered on what happened during each individual adoption process; and (3) in any event, the adopters had not suffered a concrete injury necessary for Article III standing under Spokeo v. Robins. In response, the plaintiff argued, among other things, that (1) the calls in question were advertising in nature, which requires prior express written consent under the TCPA regulations, and (2) there was “no question that none of the proposed class members signed a form specifically agreeing to receive calls on their cellular phones” from the defendants (which the defendants had apparently conceded).

At first blush, the court appeared to reject the Spokeo argument, holding that just “receiving the call itself constitutes an injury.” However, the court then ruled that “the lack of a writing d[id] not make the calls unsolicited” and “[i]f the class members agreed to receive the calls, they lack[ed] a ‘genuine controversy,’” which is necessary to establish Rule 23(b)(3) predominance in the Seventh Circuit. The court did not expressly state that the plaintiff failed to establish Article III standing under Spokeo.

The court also ruled, citing prior Northern District precedent, that “when the defendant provides specific evidence showing that a significant percentage of the putative class consented to receiving calls, issues of individualized consent predominate.” And since the defendants supplied, among other specific evidence, (1) affidavits from an unknown “number of adopters who state[d] that they [had] agreed to and expected to receive calls on their cellular phones from defendants about the offered pet insurance” and (2) affidavits from shelter employees who stated that they orally “told the adopters to expect to receive ‘communications’ from defendants” of some kind, the district court held that the trial would “involve hundreds, if not thousands, of mini-trials on the issue of consent alone.” Thus, the court denied the plaintiff’s motion to certify and granted the defendants’ competing motion to strike the class allegations. The plaintiff has filed an appeal to the Seventh Circuit. See Case No. 17-8018, Petition filed Aug. 31, 2017, Dkt. 1.

Why it matters: This decision is significant for several reasons. First, under TCPA regulations, advertising calls made to cellphones indeed require prior express written consent, and the district court’s opinion seems to suggest that oral consent could be sufficient—an issue which will likely be hotly contested on appeal. Second, while the court appears to invoke Seventh Circuit precedent governing Rule 23(b)(3) rather than Spokeo, the net result is the same (i.e., a lack of concrete injury) and thus the opinion can arguably be viewed as a rare Spokeo “win” for a TCPA defendant in the Northern District of Illinois. Third, while Spokeo is more commonly used as a threshold argument to defeat cases from the outset due to a lack of standing, it was used at a much later stage in the case to defeat class certification. Fourth, this case shows that, as a matter of strategy, a plaintiff’s failure to plead a concrete injury can be contested at any stage of a case. Fifth, this case serves as a lesson in how to defeat Rule 23(b)(3) through the use of concrete evidence, particularly when that evidence comes in the form of affidavits from putative class members.

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Customer’s Typo Costs Uber $20M in TCPA Dispute

By Christine M. Reilly, Chair, TCPA Compliance and Class Action Defense | Kristin E. Haule, Associate, Litigation

Uber has agreed to pay $20 million to settle a case that began with a customer’s typo. Plaintiff Maria Vergara, who claims she never signed up for an Uber account, brought suit, alleging Uber sent her a series of unsolicited text messages urging her to complete a sign-up process she never initiated. According to Uber’s attorney, another user had mistakenly transposed digits of their own phone number during the sign-up process, causing the plaintiff to erroneously receive the text message “Your Uber account verification number is: [four-digit numeric code]. Enter this in our app to confirm your Uber account.” Meanwhile, the would-be Uber user, whose verification code went to the plaintiff, continued to request that the verification code be re-sent, causing the plaintiff to receive a total of eight misdirected verification code texts. In addition to monetary compensation, Vergara sought for Uber to update its procedures to avoid these types of mistakes going forward.

With a Motion for Judgment on the Pleadings pending, the parties agreed to mediation. Meanwhile, Uber drivers who had filed their own class action against Uber joined the mediation. Many of the Uber driver plaintiffs had begun the process to sign up as Uber drivers but did not become “active” drivers in Uber’s system, and claim they did not provide express consent to receive automated text messages. And plaintiff Sandeep Pal claims to have received unsolicited automated text messages in connection with Uber’s “Refer-a-Friend” program without his consent.

The settlement agreement proposes three classes:

  1. Everyone Uber texted about its Refer-a-Friend program
  2. Prospective drivers who partially completed Uber’s application process and continued receiving texts after asking Uber to stop
  3. Others, like Vergara, who did not provide their information to Uber but received unwanted texts from Uber

By all accounts, $20 million is a very large settlement, especially considering the hurdles plaintiffs faced both in obtaining class certification and on the merits. Individual issues of when, how and whether consent was revoked could easily predominate for the class of prospective Uber drivers who did not complete the application process. Furthermore, an autodialer may not have been used to send Vergara the offending texts, which were manually initiated by another user. 

In addition to agreeing to pay $20 million, Uber agreed to (1) discontinue its Refer-a-Friend program automated text messages; (2) improve its opt-out system to automatically unsubscribe SMS recipients who reply with certain opt-out words; and (3) augment its sign-up process to reduce the likelihood of texting or calling the wrong phone numbers by (i) automatically deleting from its database any phone number not verified within 15 minutes, (ii) displaying the phone number entered and asking “Did you enter the correct number?” before resubmitting a verification code request, and (iii) having the system force the user to re-enter his or her phone number after one verification text resend.

The attorneys will get one-third of the settlement fund, and each named plaintiff will receive a $10,000 incentive award. The case is Vergara v. Uber Technologies, Inc., No. 1:15-cv-06942 (N.D. Ill.).

Why it matters: It is currently common practice for companies to text a verification code at a user’s request in order to verify that the user has entered valid information. Now, to minimize their TCPA risk, companies may need to implement systems to ensure the accuracy of the information entered into their verification systems. This case may also create liability issues for companies that text their job applicants and independent contractors about employee incentive programs.

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