TCPA Connect

Podium P.O.V.: Observations From Marc Roth on PACE's Annual Convention

I recently had the privilege of speaking at the Professional Association for Customer Engagement annual convention in Orlando. As in prior years, the convention's primary focus was Telephone Consumer Protection Act compliance. The TCPA, which provides for unlimited statutory damages of up to $1,500 per violation, provides companies that seek to communicate with consumers via their mobile device with obvious reasons to comply.

Although the speakers addressed various subjects such as operations, management and employee best practices, this report will only cover the compliance track.

The first compliance session addressed the issue of maintaining electronic records when a notice of an actual or potential lawsuit has been received. Failing to preserve or destroying documents that may be relevant to a litigation will likely be viewed unfavorably by a judge, or worse sanctionable, if such actions were designed to intentionally avoid discovery. As an example, the panelists reported that one company that intentionally destroyed relevant documentation was ordered to pay $8.5 million in sanctions and had six attorneys referred to the California state bar for possible disciplinary proceedings.

The second compliance session focused on how to conduct a compliance call or text campaign following the FCC's July 2015 ruling. Specifically, the panelists focused on how to obtain appropriate consent for calling and texting consumers on their mobile phones and when and how consumers can revoke consent. They also discussed the expansive definition of an autodialer and the perils of calling reassigned numbers. Attendees heard that strict compliance with the new rules is a must to avoid lawsuits and costly litigation. While the panelists offered some valuable compliance guidance given the breadth of the topics covered, many attendees posed questions that were not easily answered, evidencing the compliance difficulties that the FCC's confusing and unreasonable rulings have presented.

Christine Reilly, co-chair of Manatt's TCPA Compliance and Class Action Defense practice group, and I presented the third compliance session, titled "TCPA 2.0: A Deeper Dive on FAQs." Whereas the prior sessions focused on the basics of the TCPA and recent FCC rulings, we took a different approach and shared real client questions that fall within the cracks of the TCPA rules and exposed the nuances and gray areas they present. We discussed the legal risks facing lead generation firms and the companies that buy and use the leads. We also addressed the various FCC exemptions to the TCPA consent rules for healthcare related calls subject to HIPAA and the issues and questions they raise. While the exemptions may be appropriate for some companies, in the end we concluded that most companies would not benefit from them.

We also addressed the issue of whether using a manual dialer to avoid coverage of the TCPA really provides the user with any meaningful benefits. Given the FCC's expansive definition of an autodialer in its July 2015 ruling, developing a truly manual dialer may be elusive for many. But those who do invest in this technology are sorely mistaken if they believe they can be used to place unsolicited marketing calls (including texts) to mobile phones without fear of lawsuits. While they may ultimately have some cases dismissed by offering credible testimony in support of their dialer, other cases will still be filed and costs will be incurred in the pursuit of proving such point. Further, these companies must still comply with state laws that prohibit unsolicited marketing calls to mobile phones, regardless of the method used to place such calls. Putting aside the legal issues implicated in conducting these types of campaigns, companies need to consider the reputational harm and fallout that may ensue.

Finally, we addressed recent statements by the FTC that appear to limit the scope of the existing business relationship exemption (EBR) in the Telemarketing Sales Rule (TSR) and TCPA Do Not Call regulations (DNC). In its recent revisions to the TSR and its Biennial Report to Congress on the DNC rules, the FTC stated that an inquiry EBR belongs only to the party that is known to the consumer and from whom the inquiry is directly obtained. This would appear to limit lead generation companies from obtaining leads for third parties. But the FTC stopped just short of an absolute ban in the DNC report by acknowledging that a recipient of a lead may rely on an inquiry EBR exemption if the party was identified to the consumer at the time the consumer responded to the offer.

Further, we reported that in its Biennial DNC report, the FTC added a consumer "expectation" qualifier to purchase EBRs by stating that companies must consider whether a consumer who is on the federal DNC list would reasonably expect to receive a call from a company from which the consumer made a purchase. For example, the FTC questioned whether a consumer who makes a one-time purchase from a company would reasonably expect that such purchase would trump their desire not to receive marketing calls from the company.

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New Rules Would Limit TCPA Exception, FCC Says

Responding to concerns expressed by federal lawmakers and state Attorneys General about changes to the Telephone Consumer Protection Act that permits robocalls to individuals who owe a debt to the federal government, Federal Communications Commission Chair Tom Wheeler wrote to discuss the limits the Commission is proposing on such calls.

Section 301 of the Bipartisan Budget Act of 2015 included a provision creating an exception to the TCPA's prior express consent requirement for automated calls to cellular or residential telephones if the purpose of the calls is to collect debts owed to, or guaranteed by, the United States government.

Importantly, the provision also requires the FCC to issue regulations implementing the change. Both legislators and state AGs raised five issues of particular concern: whether calls can be made pursuant to Section 301 prior to the FCC issuing implementing regulations; whether covered calls should be allowed only to the debtor and not others (such as family members); what limits should be placed on covered calls to telephone numbers reassigned from a debtor to another person; whether there should be limits on the number and duration of automated calls without consent; and whether callers must stop calling upon a recipient's request.

Wheeler responded with his own missive, describing a draft Notice of Proposed Rulemaking currently circulating among the Commission. "The draft NPRM includes clear, pro-consumer restrictions on the type and number of calls a federal creditor may place to recover a delinquent debt, even when those calls go unanswered," the Chair wrote.

Specifically, the NPRM proposes "that only calls made after a debtor has become delinquent are covered by the exception" and "that these robocalls can only be made to the debtor, so as to prevent unwanted robocalls to relatives, friends, and other acquaintances of debtors."

In addition, Wheeler said the proposal would limit the calls to creditors and those calling on their behalf, including debt servicers, with a cap of three calls per month per delinquency. Consumers would have the ability to stop calls from the creditor "at any time" and callers would be required to inform debtors of this right.

"The draft NPRM also makes clear that the new rules will not open a door for telemarketing calls," Wheeler wrote. "The Commission remains steadfast in its defense of protections against unwanted calls. Congress specified that exempted calls must be 'solely' to collect a federal debt, and we will ensure they do not go beyond that boundary."

He noted that the FCC "worked closely" with the staff of the Consumer Financial Protection Bureau in drafting the NPRM and consulted with other federal stakeholders, including the Department of the Treasury and Department of Education.

Why it matters: Although the FCC has not yet released the draft NPRM, the agency is working on a tight timeline. The Commission was given nine months from the enactment of the Bipartisan Budget Act to issue implementing regulations, giving the agency a deadline of August 2 to complete and adopt new rules.

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Seventh Circuit: Defendant Not Liable for Faxes Sent Outside of Agreed-Upon Range

A Telephone Consumer Protection Act defendant dodged liability in a case involving notorious marketing company Business to Business Solutions (B2B) when the Seventh Circuit Court of Appeals found that the defendant did not authorize B2B to send thousands of faxes on its behalf.

Affordable Digital Hearing owner Jerry Clark received multiple sales calls from a B2B employee offering to send fax advertisements to potential business customers. Clark agreed to give the program a try. He edited and approved the language of an ad for his company.

He also verbally instructed B2B to send about 100 faxes to local businesses within a 20-mile radius of his company's location in Terre Haute, Indiana. Clark—who never asked to see the list of fax numbers that B2B was using—paid the marketing company $279.

Unbeknownst to Clark, B2B actually faxed 4,849 ads for Affordable Digital Hearing across Indiana, Illinois, and Ohio. One of the recipients, Bridgeview Health Care Center in Illinois, filed suit against Clark under the TCPA. A magistrate judge certified all fax recipients as a class and granted summary judgment for those members located within 20 miles of Terre Haute. Each of those 32 recipients was awarded $500, for a total judgment of $16,000 against Clark.

Following a bench trial, the magistrate judge held that Clark was not liable to recipients—including Bridgeview—located outside the 20-mile perimeter. Bridgeview appealed and the Seventh Circuit affirmed.

Federal regulations define the fax sender as either the person "on whose behalf" the unsolicited ad is sent or the person whose services are promoted in the ad. Using an agency analysis, the panel explained that Bridgeview could proceed on any of the three theories to demonstrate B2B sent the fax "on behalf of" Clark: express actual authority, implied actual authority, or apparent authority.

Clark did not confer express actual authority on B2B, the court said. "For this type of agency to exist, Clark must have directly spoken or written to B2B, telling it to send nearly 5,000 fax ads across multiple states," the court said. "The record establishes that Clark told B2B it should send 100 faxes within 20 miles of Terre Haute. Instead, B2B sent 4,849 faxes across three Midwestern states. Because B2B expressly contradicted Clark's actual instructions, this is clearly not express actual agency."

The panel found it "impossible" to conclude that implied actual authority existed, as "[n]othing about fax marketing inherently calls for sending thousands of advertisements," and "nothing about fax marketing inherently demands sending these ads to states where the advertiser does not do business."

Finally, the court said Bridgeview failed to establish apparent authority. "Clark did nothing to create an appearance that B2B had authority to send faxes on behalf of either Affordable Hearing or Clark himself," the panel wrote. "In fact, the fax-ad copy was the only way Clark could have communicated with the recipients, because their identities were unknown to him. And the ad did not even reference B2B. In short, B2B made an independent decision to blast faxes across multiple state lines."

The Seventh Circuit affirmed the trial court's ruling that Clark was not liable for faxes sent outside the 20-mile radius.

Clark's attempt to reverse class certification on the argument that Bridgeview, being outside of the 20-mile radius, was not an adequate class representative failed to persuade the court. Every class member had the same interest—to obtain the $500-per-recipient penalty for TCPA violations—and the fact "that Bridgeview faced an added hurdle in its claim … did not prevent the district court from finding that Bridgeview could adequately represent plaintiffs within 20 miles of Terre Haute," the court said.

The court recognized that lumping all the plaintiffs into one class created an odd outcome. The named plaintiff lost, while other class members won a judgment the named plaintiff could not collect. "It could have been worse, however, and the law allows this split-level result," the panel said, noting the "pervasive nature" of junk fax litigation.

"We doubt that Congress intended the TCPA, which is crafted as a consumer-protection law, to become the means of targeting small businesses," the court wrote. "Yet, in practice, the TCPA is nailing the little guy, while plaintiffs' attorneys take a big cut." Class counsel admitted at oral argument that they obtained B2B's hard drive and used information to find plaintiffs, with about 100 TCPA suits currently pending. "Congress likely should have targeted the marketing firms, rather than their unsuspecting clients," the panel noted.

Despite this, letting the certification order stand would not affect Clark's liability to pay the plaintiff and the judgment is already limited to class members within 20 miles of Terre Haute, the court said.

To read the opinion in Bridgeview Health Care Center v. Clark, click here.

Why it matters: The Seventh Circuit decision affirmed the use of an agency analysis to consider whether Clark could be liable for the faxes sent by B2B and found that none of the three theories of agency applied to the defendant's relationship with the marketing company. The panel also took the opportunity to highlight the "national cash cow for plaintiff's attorneys specializing in TCPA disputes," while noting that the defendant is stuck with a $16,000 judgment simply for trying a new kind of marketing.

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Insufficient Allegations of ATDS Result in Dismissal of TCPA Suit

Dismissing a complaint against Facebook, a federal court judge in California said the charges of Telephone Consumer Protection Act violations were insufficient to support the putative class action complaint.

Alleging that the social networking site repeatedly sent him unwanted text messages, Noah Duguid filed suit against Facebook. With variations on time, the messages read "Your Facebook account was accessed from Chrome on Windows at 8:15am. Log in for more info." Duguid attempted to stop receiving the texts by replying "Off" and received a message in return that "Facebook texts are now off. Reply on to turn them back on." Despite this exchange, he continued to receive the text messages, he said.

Facebook explained that the messages are a security feature that permits users to activate "login notifications" to provide alerts via text when an account is accessed from a new device. Each message is unique and sent to a single phone number at a specific time when the access occurs, the social network contended.

The defendant moved to dismiss the case, arguing that the plaintiff failed to adequately allege the login notifications were sent by an automatic telephone dialing system, the messages fell within the TCPA's exception for calls "made for emergency purposes," and the texts could not be restricted under the First Amendment because they were noncommercial security messages.

Siding with Facebook on the first argument, U.S. District Court Judge Jon S. Tigar dismissed the suit without addressing the alternative arguments.

"Plaintiff alleges that '[t]he text messages sent to Plaintiff's cellular phone were made with an ATDS as defined by 47 U.S.C. Section 227(a)(1),' and that '[t]he ATDS has the capacity to store or produce telephone numbers to be called, using a random or sequential number generator,' " the court wrote. "This conclusory allegation that Facebook used an ATDS is not, without more, sufficient to support a claim for relief under the TCPA."

Because it may be difficult for a plaintiff to identify the specific type of dialing system used without the benefit of discovery, some courts have allowed TCPA claims to proceed beyond the pleading stage where a plaintiff's allegations support the inference that an ATDS was used, Judge Tigar said.

"Where, however, a '[p]laintiff's own allegations suggest direct targeting that is inconsistent with the sort of random or sequential number generation required for an ATDS,' courts conclude that the allegations are insufficient to state a claim for relief under the TCPA," the court explained.

Duguid failed to meet even this lenient standard. He alleged that login notifications were designed "to alert users when their account is accessed from a new device" and he attached an exhibit to his complaint from Facebook's online Help Center, which explained that users must add their mobile numbers to their accounts in order to receive login notifications by text message.

"These allegations suggest that Facebook's login notification text messages are targeted to specific phone numbers and are triggered by attempts to log in to Facebook accounts associated with those phone numbers," Judge Tigar wrote. "Although Plaintiff alleges that the operation of this system is 'sloppy' because messages are sent to individuals who have never had a Facebook account, have never shared their phone number with Facebook, and/or who have requested deactivation of the login notifications, he does not suggest that Facebook sends text messages en masse to randomly or sequentially generated numbers."

While it was at least possible that Facebook utilized an ATDS, "nothing in Plaintiff's Complaint 'nudge[s] [his] claims across the line from conceivable to plausible,' " the court concluded, dismissing the complaint.

To read the order in Duguid v. Facebook, Inc., click here.

Why it matters: The court dismissed the suit without prejudice, leaving Duguid the opportunity to amend his complaint and try again. But in a victory of sorts for the defendants, the judge made clear that a "naked assertion" that a text message was sent using an ATDS was insufficient to support a claim under the TCPA.

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