TCPA Connect

FCC Combats Spoofed Robocalls

As part of an initiative that would enable voice service providers to better protect subscribers from illegal and fraudulent robocalls, the Federal Communications Commission has released a Notice of Proposed Rulemaking (NPRM) and Notice of Inquiry (NOI).

“Despite FCC and other protections to help consumers avoid unwanted robocalls, consumers still get an unacceptably high volume of calls that can annoy or defraud,” the agency explained in a fact sheet. “One particularly pernicious category of robocalls is spoofed robocalls—i.e., robocalls where the caller ID is faked, hiding the caller’s true identity. Fraudsters bombard consumers’ phones at all hours of the day with spoofed robocalls, which in some cases lure consumers into scams (e.g., when a caller claims to be collecting money owed to the Internal Revenue Service) or lead to identify theft.”

To better protect consumers, the NPRM proposes to adopt rules that would permit providers to block spoofed robocalls when the subscriber to a particular telephone number requests that calls originating from that number be blocked (sometimes referred to as “Do Not Originate”). This idea builds on efforts by the industry’s Robocall Strike Force.

In addition, the agency asked for comment on rules that would permit providers to block three types of spoofed robocalls when the spoofed Caller ID cannot possibly be valid—invalid numbers, valid numbers that are not allocated to a voice service provider, and valid numbers that are allocated but not assigned to a subscriber. According to the FCC, providers should be able to easily identify numbers that are invalid, although it requested input on the ability of providers to accurately and timely identify numbers that fall into the second and third categories.

The NPRM also requested comment on how to handle spoofing from internationally originated numbers. Should these calls be subject to the new rules? Or do they require special treatment?

As for the NOI, the FCC sought additional input on whether and how to create a safe harbor for providers from their FCC-imposed call completion obligations when they rely on objective criteria to prevent fraudulent, illegal, or spoofed robocalls from reached consumers. Call completion policies demand care in identifying illegal or fraudulent calls, the agency noted.

“Consequently, we seek comment on objective standards that would indicate to a reasonably high degree of certainty that a call is illegal or fraudulent, whether to adopt a safe harbor to give providers certainty that they will not be found in violation of the call completion and other Commission rules when they block calls based upon an application of objective standards, and whether a confidential review process or other procedures would ensure that providers utilize appropriate objective standards while also reducing the likelihood that callers can circumvent those standards,” the FCC wrote.

Further details, such as whether sharing of information among providers can increase the effectiveness of call blocking methodologies and if provider size, geographic location, or other factors have an impact on which methods provide the most accurate results, were requested by the agency. The FCC also expressed concern that the formulation of a safe harbor might provide a roadmap enabling makers of illegal and fraudulent robocalls to circumvent call blocking by providers and asked about the need for protections for legitimate callers.

To read the FCC’s NPRM and NOI, click here.

Why it matters: Attempting to balance competing policy considerations—some favoring blocking and others disfavoring blocking—the FCC said the NPRM seeks “to arrive at an effective solution that maximizes consumer protection and network reliability,” asking the industry to weigh in on the proposals. The NPRM and NOI were the first topic on the agency’s agenda for its March Open Meeting.

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Second Circuit: Rule 68 Offer Didn’t Moot TCPA Class Action

An unaccepted settlement offer did not moot a Telephone Consumer Protection Act class action, the U.S. Court of Appeals for the Second Circuit ruled, reversing dismissal of the suit based on the U.S. Supreme Court’s decision in Campbell-Ewald v. Gomez.

Radha Geismann, M.D. sued ZocDoc, Inc., accusing the doctor-finding service of violating the statute by sending two unsolicited fax advertisements. After Geismann filed the complaint as well as a motion for class certification, the defendant made a settlement offer as to Geismann’s individual claims pursuant to Federal Rule of Civil Procedure 68.

Geismann rejected the offer of $6,000, attorney’s fees, and an injunction not to violate the TCPA in the future. ZocDoc then moved to dismiss the action for lack of subject matter jurisdiction, arguing that its offer afforded Geismann complete relief, mooting the action.

A U.S. District Court Judge granted the motion, entered judgment in Geismann’s favor under the terms offered by the defendant, and dismissed the action. Geismann appealed and while the case was pending, the U.S. Supreme Court issued its opinion in Campbell-Ewald.

In Campbell-Ewald, the five-justice majority ruled that an unaccepted Rule 68 offer is a nullity and that “[w]ith the offer off the table, and the defendant’s continuing denial of liability, adversity between the parties persists,” and the district court retained jurisdiction. The Court also recognized that a class representative with a live claim “must be accorded a fair opportunity to show that certification is warranted,” and that so long as the named plaintiff’s individual claim remains alive, so do the alleged claims of the purported class.

Considering the Supreme Court’s opinion, the Second Circuit reversed, finding that the instant case mirrored the situation presented in Campbell-Ewald. “The district court’s conclusion in the case now before us is, of course, understandable, it having been reached before Campbell-Ewald was decided,” the panel wrote. “And, as we have noted, ‘our prior case law has not always been entirely clear on this subject.’ But the basis upon which the district court entered judgment did not exist: An unaccepted Rule 68 offer of judgment does not render an action moot.”

ZocDoc made two attempts to distinguish Campbell-Ewald. First, the defendant argued that the district court had entered judgment in the Geismann case, giving effect to the unaccepted offer. But the Second Circuit panel was not persuaded. “We do not find this distinction meaningful because the judgment should not have been entered in the first place,” the panel wrote. “The result in Campbell-Ewald cannot be avoided simply by entering a judgment effectuating an otherwise precluded dismissal.”

Further, Geismann contested whether the offer in fact exceeded any recovery possible under the TCPA, in part because the parties had divergent legal theories regarding the amount of damages available under the TCPA (the plaintiff argued the statute allows a person to recover $500 in damages for each violation, not just limiting recovery to $500 per call or fax). The court agreed, noting that this issue “constitutes a live controversy precluding dismissal on the basis of mootness.”

ZocDoc’s second argument, that Geismann was not left “emptyhanded” by the offer, also failed to pass muster with the Second Circuit. “Geismann has not been compensated in satisfaction of its claim, which would require, at a minimum, its acceptance of a valid offer,” the panel wrote. “Geismann thus remains emptyhanded.”

The defendant’s post-judgment actions moved it no closer to its goal, the court added, as the check was deposited in furtherance of a judgment that should not have been entered in the first place and did nothing to satisfy the demand for injunctive relief.

Finally, the court noted that the facts of the case did not match the hypothetical posed by Campbell-Ewald, where the Supreme Court declined to consider whether the outcome would be different had the “defendant deposit[ed] the full amount of the plaintiff’s individual claim in an account payable to the plaintiff, and the court then enter[ed] judgment for the plaintiff in that amount.”

“Here, the district court entered a judgment that should not have been entered in the first place, and ZocDoc then more than one year later deposited an amount in satisfaction of that errant judgment in an account payable to Geismann,” the panel said.

The court reversed dismissal of the plaintiff’s suit and remanded the case back to the district court.

To read the decision in Geismann v. ZocDoc, Inc., click here.

Why it matters: The Second Circuit left no room for doubt in its holding. “An unaccepted Rule 68 offer of judgment is, regardless of its terms, a legal nullity,” the panel wrote, rejecting all of the defendant’s attempts to distinguish the Supreme Court’s decision in Campbell-Ewald. As the case law on Rule 68 offers of settlement following Campbell-Ewald continues to develop throughout the country, defendants in the Second Circuit are effectively foreclosed from using this strategy to dispose of TCPA suits.

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Second Circuit Doubles Down on Mootness Ruling After Campbell-Ewald

Reinforcing its interpretation of the U.S. Supreme Court’s decision in Campbell-Ewald v. Gomez, the U.S. Court of Appeals for the Second Circuit affirmed that an unaccepted offer of judgment made pursuant to Federal Rule of Civil Procedure 68 is a legal nullity and does not require dismissal of a Telephone Consumer Protection Act suit.

John H. Lary filed suit against Rexall Sundown, alleging the company—along with related corporate entities and a marketing company that provided its services to them—violated the TCPA. The defendants responded with an offer of judgment pursuant to Rule 68 and Lary countered by moving for class certification to prevent the defendants from mooting his class claims.

Even though Lary did not accept the offer, the defendants moved to dismiss the complaint, arguing that all of the plaintiff’s claims had been mooted by the offer of judgment, leaving the district court without subject matter jurisdiction. The court granted the motion to dismiss, denied the motion for class certification, and entered judgment in the plaintiff’s favor based on the Rule 68 offer.

Lary appealed to the Second Circuit. While the appeal was pending, the Supreme Court decided the Campbell-Ewald case, where the justices held that “[a]n unaccepted settlement offer—like any unaccepted contract offer—is a legal nullity, with no operative effect,” and therefore, a case or controversy remained between the parties.

Recently, a panel of the Second Circuit applied the Campbell-Ewald decision in Geismann v. ZocDoc. The case involved a similar fact pattern, where a TCPA defendant made a Rule 68 offer of judgment to the plaintiff and the district court granted the motion to dismiss on mootness grounds (see discussion of case in the article above). Unlike Campbell-Ewald, however, the Geismann district court entered a judgment in the plaintiff’s favor.

Although the Geismann defendant argued the judgment distinguished the case from Campbell-Ewald, the panel was not persuaded, reversing the motion to dismiss as “the judgment should not have been entered in the first place.”

In a summary order, the court found the facts in the instant case “largely indistinguishable” from Geismann. “The District Court’s order dismissing Lary’s putative TCPA class action was premised on [the defendant’s] Rule 68 offer mooting his claim,” the panel wrote. “Pursuant to the holdings of Campbell-Ewald and Geismann, the District Court’s dismissal was based on an error of law since Lary’s claim was not mooted by [the defendant’s] offer of judgment. Accordingly, judgment should not have been entered in his favor.”

The defendants argued their situation was analogous to the hypothetical posed by Campbell-Ewald, where the Supreme Court declined to consider whether the outcome would have been different had the defendant deposited the full amount of the plaintiff’s individual claim in an account payable to the plaintiff and the court then entered judgment for a the plaintiff in that amount. But the panel disagreed.

“Here, ‘the district court entered a judgment that should not have been entered in the first place, and [the defendants] then,’ after Campbell-Ewald was issued, sent Lary a certified check ‘in satisfaction of that errant judgment,’” the court said. “Lary did not accept the check, nor did [the defendants] seek leave to deposit the amount of its offer with the District Court. The hypothetical posed by Campbell-Ewald is thus not present here. As such, we need not, and do not, decide whether a different outcome would result if the facts here matched this hypothetical.”

To read the summary order in Lary v. Rexall Sundown, Inc., click here.

Why it matters: The Second Circuit doubled down on its interpretation of the Supreme Court’s Campbell-Ewald decision, emphasizing that an unaccepted Rule 68 offer is a legal nullity that does not moot a case. The panel also declined to apply the hypothetical posed by the justices, finding that the facts of the case did not fit.

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TCPA Class Action Involving Faxed Ads Settles for $17M

Tens of thousands of faxes will cost Roche Diagnostics Corporation $17 million in a Telephone Consumer Protection Act settlement.

Last year, Econo-Med Pharmacy Inc. sued Roche alleging that the company sent “tens of thousands” of faxes to pharmacies across the country advertising products such as Accu-Chek test strips. The faxes did not contain the TCPA’s required opt-out notice, the plaintiff alleged, seeking to recover under the federal statute and Indiana’s Deceptive Consumer Sales Act.

In addition to the usual pre-trial motions and discovery, the proceedings were stayed while Roche pursued a Petition for Waiver with the Federal Communications Commission. Last November, the FCC granted its waiver request through April 30, 2015 for non-compliant faxes that were sent without the required opt-out information. Not long after, the parties agreed to mediation and reached a deal.

The settlement agreement requires Roche to establish a non-reversionary fund of $17 million. Class members (pharmacy recipients dating back to April 2012) are eligible for an estimated $500 each, with up to one-third of the fund (or $5.6 million) possible for class counsel and a $5,000 class representative award for Econo-Med.

The value of the deal “falls well within the range of a reasonable settlement,” the plaintiff argued in its memorandum in support of preliminary approval of the agreement, noting that the estimated cash payments are “directly in line with the statutory damages provided in the TCPA.” The estimated recovery also exceeds the average recovery in similar TCPA cases, the plaintiff added, citing approval of deals where class members received $30.21, $80.26, and $255.95.

Roche, which did not oppose the motion in support of settlement, denies any wrongdoing in the case.

To read the decision in Econo-Med Pharmacy v. Roche Diagnostics Corp., click here.

Why it matters: In addition to avoiding the usual “risks, uncertainties, and delays of continued litigation,” the plaintiff acknowledged that settling the case would avoid the risk of an unfavorable development in the U.S. Court of Appeals for the D.C. Circuit in Bais Yaakov of Spring Valley v. FCC. That case presents the issue of whether the FCC had the authority (and reasonably exercised it) when it retroactively waived violations of the opt-out requirement. On March 31, the D.C. Circuit issued its decision, ruling that the Solicited Fax Rule, which imposed opt-out requirements on solicited faxes, was unlawful. The D.C. Circuit, finding opt-outs were not required for solicited faxes, did not reach whether the waivers were properly issued. It is likely that the plaintiff secured a favorable settlement just in time–two weeks before the D.C. Circuit overturned the Solicited Fax Rule.

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News and Views

Becker’s Hospital Review turned to Christine Reilly, Marc Roth and Diana Eisner, members of Manatt's TCPA compliance and class action defense team, to comment on the D.C. Circuit Court's recent invalidation of the FCC's Solicited Fax Rule. In "No Opt-Out? No Problem: D.C. Circuit Overturns the FCC's Solicited Fax Rule," Manatt's team walks through the history of the FCC's Rule and offers a list of best practices for companies that engage in advertising via fax in light of the recent developments. Click here to read the full article.

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