2017 in Review: Significant TCPA Litigation and Regulatory Developments

TCPA Connect

Undeniably, 2017 was a big year for the Telephone Consumer Protection Act (TCPA), from the transition of power at the Federal Communications Commission (FCC) to a slew of cases directly impacting TCPA compliance and litigation. The number of TCPA lawsuits (class actions and, to a lesser extent, individual actions) filed each year in federal and state courts continues to steadily rise, and we have little doubt this trend will continue into 2018 and beyond, making ongoing developments all the more important to businesses (and their counsel) from both a compliance and a litigation-defense perspective. What follows is a summary of several important regulatory and litigation developments from last year that we have reported on in past editions and that will likely impact the TCPA world for the foreseeable future.

Dish Network’s TCPA Troubles Continue (Agency Liability)

In Krakauer v. Dish Network LLC, Thomas Krakauer filed suit against Dish Network, one of the two major satellite network providers in the U.S. (the other being DirecTV), alleging that he received dozens of calls from Satellite Systems Network (SSN) on behalf of Dish, despite the fact that his number was registered on the National Do Not Call (DNC) Registry, and even after he complained to Dish about the calls and Dish said it had placed him on its internal DNC list.

In January 2017, a jury found that SSN acted as Dish’s agent when it made the calls at issue and violated the TCPA, awarding $400 for each of the 51,119 calls at issue for a total of approximately $20.47 million. After the verdict, the parties submitted arguments on willfulness. U.S. District Judge Catherine C. Eagles of the Middle District of North Carolina had little trouble finding that Dish willfully violated the statute and trebled the damage award, entering judgment in the amount of $61 million.

This opinion is only the latest blow for Dish Network, which has had a rough few months, between the staggering $280 million verdict in the government’s case in the Central District of Illinois and Judge Eagles’ judgment of $61 million in the Krakauer dispute. The lesson for other companies? Ensure TCPA compliance, particularly on the part of your vendors hired to make telemarketing calls, or face possible agency liability and significant penalties.

FCC Under Ajit Pai: Pro-business and Other Implications for the TCPA

In January 2017, President Donald Trump appointed Commissioner Ajit Pai to serve as the next chairman of the FCC. While not surprising given that Pai was widely viewed to be the presumptive pick, his appointment as commissioner came sooner than anticipated. Since his appointment to a Republican seat at the FCC in 2012, Pai has been a vociferous critic of the Democrat-controlled FCC on many issues, most notably on TCPA rulings and orders. His appointment will no doubt result in significant changes to the FCC’s position on the myriad of TCPA related-issues.

Pai is perhaps best-known for his lengthy, witty and sometimes scathing dissent in the FCC’s July 2015 TCPA Omnibus Ruling and Order. Beyond that, Pai has made clear that he believes the FCC’s interpretations of the TCPA should be fairly circumscribed to follow the clear text and legislative history. Pai’s appointment may also open the floodgates for petitions seeking clarification of other controversial and muddy aspects of the FCC’s TCPA rulings. Moreover, Pai’s appointment might result in more business-friendly decisions on various petitions currently before the FCC seeking guidance on various other aspects of the TCPA.

While the exact contours of Pai’s influence on the FCC remain to be seen, his tweet on the day he was nominated is promising: “There is so much we can do together to bring the benefits of the digital age to all Americans and to promote innovation and investment.” Hopefully, this includes freeing businesses from the vast uncertainty and litigation exposure caused by simply communicating with consumers.

Defendant’s Calling System Ruled Not an Autodialer

In Smith v. Stellar Recovery Collection Agency, Inc., plaintiff Lakisha Smith alleged that defendant Stellar Recovery Inc. (Stellar) called her cellphone dozens of times without her consent about a debt in violation of both the Fair Debt Collection Practices Act and the TCPA. Under the TCPA, it is unlawful to use an automated telephone dialing system (ATDS) to make debt collection calls without prior consent. Stellar admitted to not obtaining consent, but argued that the third-party program it used to make the calls, LiveVox Human Call Initiator (HCI), is unable to dial phone numbers without “human intervention” because the “the equipment cannot store numbers, nor can it dial numbers without the call being initiated by the clicker agents.”

U.S. District Judge Stephen J. Murphy of the Eastern District of Michigan agreed with the defendant, adopting the magistrate judge’s finding that because of the function of the clicker agent confirming each telephone number individually, human intervention is “clearly required” to dial numbers with the HCI system. The court pointed to other cases in which calling systems that relied on “human clickers” to initiate calls were found to not be an ATDS. In fact, one federal judge in Florida had previously analyzed the defendant’s HCI system, also ruling that it was not an ATDS.

This decision adds to the growing progeny of cases finding that a calling system that is “clearly an advanced and efficient method of contacting debtors [or consumers]” is not necessarily an ATDS. Systems that require employees to operate them and initiate calls do not qualify as an ATDS, and the more human intervention there is, the better.

California TCPA Defendant Gets Mixed Rulings

In Nghiem v. Dick’s Sporting Goods, Inc., et al., plaintiff Phillip Nghiem alleged that he enrolled in the Dick’s mobile alerts program by texting the word “JOIN” in February 2015 and later texted the word “STOP” in December 2015 to remove himself from the program. Dick’s responded with a text confirming his unsubscription. But according to Nghiem, he continued to receive messages from Dick’s (at least nine texts) through January 2016. Based on these text messages, he filed a putative class action alleging violations of the TCPA. The parties then filed pretrial motions: a motion to dismiss from Dick’s, arguing that the plaintiff lacked standing, and a motion from the plaintiff to certify a class represented by Nghiem.

U.S. District Judge Cormac J. Carney of the Central District of California denied both motions. First, falling in line with opinions from other federal courts in California, Illinois and West Virginia, Judge Carney disagreed with Dick’s that Nghiem had not alleged a concrete and particularized injury-in-fact as required by Article III of the U.S. Constitution, and rejected the defendant’s interpretation of Spokeo, Inc. v. Robins, the U.S. Supreme Court’s watershed ruling on standing in the context of the Fair Credit Reporting Act. The court did, however, consider the plaintiff’s motivation and character when it turned to the motion to certify the class in the suit. As a plaintiffs’ attorney who handles consumer and debtor disputes himself, Nghiem has represented plaintiffs in TCPA cases on at least six occasions and enrolled in several promotional campaigns that have been challenged by his law firm.

Faced with a novel issue regarding a plaintiff’s motivation in bringing a case, Judge Carney rejected Nghiem’s motion for class certification because his role as both lead plaintiff and counsel would require him to address defenses that would be unique to him, thus failing the “typicality” requirement for certification under Federal Rule 23(a).

Revocation? Think Again

In August 2017, the U.S. Court of Appeals for the Second Circuit issued what might be the most business-friendly TCPA decision we have seen in a long time, in Reyes v. Lincoln Automotive Financial Services. The decision is available here.

The named plaintiff, Alberto Reyes Jr., leased a new luxury Lincoln in 2012 and provided his cellphone number in his lease application. The application included a provision that Reyes “expressly consent[ed]” to contact via “prerecorded or artificial voice messages, text messages . . . and/or automatic telephone dialing systems.” Not long after he signed the lease, Reyes stopped making payments. Lincoln called Reyes many times to cure his default. Reyes claimed he mailed Lincoln a letter demanding that all calls to his cellphone cease, but the calls continued.

In 2015, Reyes filed a TCPA lawsuit in the U.S. District Court for the Eastern District of New York against Lincoln, seeking $720,000 in damages for the allegedly unlawful phone calls. The district court granted summary judgment in Lincoln’s favor, finding that Reyes failed to prove he revoked consent, and that regardless, the TCPA does not permit a party to a legally binding contract to unilaterally revoke bargained-for consent to be contacted.

Reyes appealed. The Second Circuit disagreed that Reyes failed to prove he revoked consent, but agreed that the TCPA does not permit a consumer to revoke his or her consent to be called “when that consent forms part of a bargained-for exchange.” The court’s decision is grounded on the difference between the definitions of “consent” in tort law and in contract law. In tort, consent is generally a “gratuitous action,” and its effectiveness is extinguished upon termination. In contract, however, consent to another’s action can become irrevocable when provided in a legally binding agreement. Thus, the Second Circuit affirmed.

So far, the decision has not been appealed. For now, businesses should consider reviewing their contracts and including a strong, unambiguous “consent to contact” provision. These provisions could not only allow companies to continue collection efforts in the event of a default, even in the face of a purported revocation, but they also serve more fundamental purposes of ensuring consent is properly obtained in the first instance and in managing consumer expectation.

Would-Be Employer Targeted in New TCPA Suit (Revocation by Silence or Inaction?)

Preceding the Reyes case, an important district-level, business-favorable decision was issued by U.S. District Judge Sara L. Ellis of the Northern District of Illinois, in the Dolemba v. Kelly Services, Inc. case in January 2017.  

The named plaintiff, Herminia Dolemba, submitted an application to defendant Kelly Services, Inc., a temporary staffing company, in March 2007. She indicated an interest in positions using office skills such as accounts payable and accounts receivable. She also provided her cellphone number on the application form. Signing the application, Dolemba “authorize[d] Kelly to collect, use, store, transfer, and purge the personal information that [she] provided for employment-related purposes.” Dolemba did not hear back from Kelly until February 2016 (i.e., nearly a decade later), when her cellphone allegedly received a call made using an ATDS, soliciting individuals for employment as machine operators in certain locations. She responded with a putative TCPA class action, arguing that the call exceeded the scope of her consent and that her consent expired long before she received the call in 2016.

Moving to dismiss, Kelly told the court that Dolemba’s signature on the employment application indicated her consent to receive calls regarding employment opportunities, which encompassed the call at issue. Judge Ellis agreed, and she granted Kelly’s motion with prejudice.

The decision is a victory not just for employers concerned about using modern technology to reach out to job applicants, but for TCPA defendants more generally. Judge Ellis confirmed that a consumer’s “silence or inaction” cannot revoke consent and that the plaintiff’s broad consent to be contacted for “employment-related purposes” even encompassed a job opportunity in which she may not have been interested.

Yet Another Blow to Spokeo Strategy in TCPA Cases (Third Circuit)

In Susinno v. Work Out World, the U.S. Court of Appeals for the Third Circuit reversed an order from the U.S. District Court for the District of New Jersey, which had dismissed a putative TCPA class for lack of standing where the plaintiff had received a single prerecorded call from the defendant offering a VIP gym membership but otherwise suffered no damages, in July 2017.

The named plaintiff, Noreen Susinno, alleged that she suffered harm from defendant Work Out World’s single, unsolicited call to her cellphone—which she did not answer, was left on her voicemail, and resulted in no fees or other expense to her—because it reduced her available cellular minutes, wasted her time retrieving the voicemail, depleted her cellular phone battery and was a “nuisance.” In essence, the Third Circuit agreed with the plaintiff, ruling that the single call was an invasion of the plaintiff’s privacy and was precisely the type of harm against which the TCPA was designed to protect despite the marked lack of monetary harm.

The Third Circuit’s opinion is the most recent of a growing, primarily district-level (at least so far) trend among various federal courts to find in favor of plaintiffs on an Article III standing challenge under Spokeo even in the face of a one-time, seemingly intangible injury. While in our experience the Third Circuit is typically plaintiff-friendly in the consumer protection arena, this decision demonstrates that the Spokeo card will be a difficult one to play in TCPA cases pending there. As Spokeo has not been the silver bullet some in the defense bar (optimistically) hoped it would be, knowledge of the TCPA and creativity in defending these cases remain critical.

D.C. Circuit Invalidates FCC's Solicited Fax Rule

In a significant victory for TCPA junk fax defendants in spring 2017, a split panel of the U.S. Court of Appeals for the District of Columbia Circuit invalidated the FCC’s “Solicited Fax Rule.” Created by the FCC in a 2006 order, the Solicited Fax Rule required that fax advertisements sent with a recipient’s prior express invitation or permission contain an opt-out notice requiring specific information.

The impact of this is likely to be felt for years to come, particularly in pending TCPA litigation, assuming it is not overturned on further appeal. It is generally accepted that the D.C. Circuit’s rulings on agency actions are binding on courts across the country because the Hobbs Act grants the D.C. Circuit primary jurisdiction on administrative law and agency issues. The decision could be the death knell for pending TCPA class actions involving solicited faxes sent without the detailed opt-out notice required by the regulations. The decision might also very well pull the rug out from under the cottage industry of plaintiff law firms that have been capitalizing on the Solicited Fax Rule. Indeed, up to this point, plaintiffs have been successful in making junk fax claims under the TCPA based merely on an improper opt-out notice, which alone was a $500-per-fax minimum penalty. Now plaintiffs will have to focus on whether the fax was solicited.

As expected, the decision has been appealed to the U.S. Supreme Court, but as of January 2018, the Court has not yet decided to take the case. As for the FCC, given that Chairman Pai dissented from the FCC’s 2014 order confirming the scope of the Solicited Fax Rule, stating that the commission’s statutory construction amounted to “convoluted gymnastics,” the new FCC under a Trump administration is unlikely to support further appeal. For now, we can likely expect class action plaintiffs to use an appeal as a way to keep their cottage industry alive.

Reassigned Numbers: Commenters Embrace Database, Split on Safe Harbor

In July 2017, the FCC released a Notice of Inquiry asking for feedback on handling unwanted phone calls to reassigned numbers. Feedback included questions about the ways in which providers could report number reassignments and what information should be reported. The commission also sought comment on the appropriate mechanism for reporting, suggesting the creation of a central database of reassigned numbers, where providers could report information and to which robocallers could turn for a list. Options included FCC overseeing the database, each voice service provider operating its own list, having a publicly available database, or having providers report reassigned number information to robocallers directly.

Many commenters expressed support for the FCC’s plan to establish a database of reassigned numbers as well as for the related idea of a corresponding safe harbor for companies that scrub their calling lists based on the database. Other commenters praised the database idea but sought to limit the safe harbor. Together, eight consumer groups (including the National Consumer Law Center, Public Citizen and Consumer Action) joined forces to advocate for a “simple, inexpensive, ubiquitous and transparent” design of a database, with all telephone service providers required to participate.

Identifying reassigned numbers with only imperfect market solutions available is one of the biggest problems created by the FCC’s July 2015 ruling. The solution of establishing a central database for reassigned numbers appeared to receive support from the majority of commenters, despite disagreement in the debate over the creation of a safe harbor. Industry groups advocated for the safe harbor, emphasizing the potential for liability under the TCPA and the “excessive litigation” they could face as a result of an error. Alternatively, consumer groups argued against the need for total relief from liability and instead pushed for more limited protection based on use of the database. Now that the time for comments has ended, hopefully the FCC will review the submissions and decide how to move forward in short order.

Human Intervention Means Program Not ATDS, Illinois Federal Court Rules

In Arora v. Transworld Systems, Inc., the named plaintiff, Ashok Arora, claimed that the defendant, Transworld Systems Inc. (TSI), called his cellphone with an ATDS and without prior express consent on a dozen occasions. He filed suit in Illinois federal court alleging violations of the TCPA. According to the company’s records, TSI placed a total of 13 calls to Arora using a web-based dialing program called Live Vox Human Call Initiator (HCI)—i.e., the same system used in the Smith case discussed above. Thus, like the defendant in Smith, TSI argued that the program is a human-initiated and human-controlled dialing system. Specifically, each call initiated from HCI must be launched by a human “clicker agent” who is responsible for confirming that the number to be dialed is the correct number and who then must physically click the number in order for it to be called. The call cannot be made without the clicker agent, who also monitors a real-time dashboard for information about “closer agent” availability, the number of calls in progress and other metrics.

Based on HCI’s requirement of human intervention, the plaintiff failed to allege the defendant used an ATDS, necessitating dismissal of the suit, as TSI argued. U.S. District Judge Charles P. Kocoras of the Northern District of Illinois agreed, noting that HCI was specifically designed to comply with the requirements of the TCPA, and thus granted summary judgment in TSI’s favor in August 2017.

This decision, out of a frequently plaintiff-friendly jurisdiction and one with a great deal of TCPA litigation, adds to a growing body of law stating that a click-to-call dialing system using human intervention is not an ATDS for purposes of the TCPA, joining federal courts in Florida and Michigan. While uncertainty abounds, after the FCC’s July 2015 ruling, on the question of what an ATDS is, this decision can provide some measure of comfort to companies using click-to-call dialing systems while we await the D.C. Circuit’s ruling.


These are but a few notable examples that lead to one conclusion: The TCPA world in 2017 was just as tumultuous as it was in previous years on both the litigation and regulatory fronts. Spokeo standing challenges in TCPA cases continue to be a problem for the defense bar, yet counsel have bravely soldiered on and have pressed that argument despite few successes. We see this continuing. Agency liability for TCPA violations should also be front of mind for defendants in light of the recent Dish Network decisions and judgments. But defendants have had particular successes at the district and appellate levels, both in arguing that significant human intervention in a calling platform means the platform is not an ATDS and on the issue of consent revocation, among other things. And arguably the biggest defense “win” of the year came from the D.C. Circuit’s invalidation of the Solicited Fax Rule. 

Looking ahead to 2018 and beyond, we expect the trend in the number of TCPA class actions being filed to continue its steady growth, and there is no end in sight absent major regulatory changes by the Trump administration. Many cases are being filed in the Northern District of Illinois, which tends to tilt heavily (but not exclusively) toward the plaintiffs’ bar, with more being filed seemingly every day. We expect that many cases also will be filed at the state level in 2018, in the hopes that state judges will be more plaintiff-friendly and that less sophisticated defendants may not remove. We also expect that the Trump administration and the new FCC chairman will push toward more business-friendly regulations and that there will be more FCC petitions clarifying prior rulings which, in turn, will help defendants. Finally, we note that many courts have been reluctant to make dispositive rulings in TCPA pending cases until the D.C. Circuit decides the ACA International v. FCC case, which we expect (or hope) will be issued in 2018—although oral argument was held in October 2016, so we won’t hold our breath.



pursuant to New York DR 2-101(f)

© 2024 Manatt, Phelps & Phillips, LLP.

All rights reserved