TCPA Connect

After FCC Citation for TCPA Violations, Lyft Changes Terms of Service

Less than a week after the Federal Communications Commission cited Lyft for violating the Telephone Consumer Protection Act by requiring customers to provide consent to receive automated text messages, the company changed its terms of service.

In the citation, the FCC said it found that Lyft “(1) unlawfully conditioned consumers’ ability to use Lyft’s services on their agreement to receive marketing text messages, and (2) illegally circumvented the FCC’s disclosure requirements for prior express written consent.”

Lyft requires users to agree to its terms of service prior to entering their personal information. Section 6 of the TOS reads: “By becoming a User, you expressly consent and agree to accept and receive communications from us, including via e-mail, text message, calls, and push notifications to the cellular telephone number you provided to us. By consenting to being contacted by Lyft, you understand and agree that you may receive communications generated by automatic telephone dialing systems and/or which will deliver prerecorded messages sent by or on behalf of Lyft, its affiliated companies and/or Drivers, including but not limited to … communications concerning promotions run by us or our third-party partners.”

The Section further stated that “You acknowledge that you are not required to consent to receive promotional messages as a condition of using the Lyft Platform or the Services. However, you acknowledge that opting out of receiving text messages or other communications may impact your use of the Lyft Platform or the Services.”

During the course of its investigation, the FCC staff found that Lyft did not provide unsubscribe options for consumers and that even after searching for instructions on how to opt out of texts, no instructions could be found.

“FCC staff also discovered that when they followed the opt-out instructions, they were no longer able to receive security confirmation text messages needed to log in to their Lyft accounts,” the agency said in its citation. “In other words, exercising the option to decline marketing messages made it impossible to use Lyft’s services. Accordingly, the evidence shows that Lyft’s opt-out representations are illusory in nature, and Lyft effectively requires all consumers to agree to receive marketing text messages and calls on their mobile phones in order to use services.”

The FCC’s TCPA regulations make it unlawful to require a consumer to consent to receive autodialed or prerecorded telemarketing or advertising calls or texts as a condition of purchasing any property, good, or service. Therefore, the agency said Lyft’s TOS violated the regs, as the company failed to obtain prior express written consent as mandated.

Giving Lyft 30 days to respond to the citation, the FCC cautioned that future violations could result in monetary forfeitures of $16,000 per violation and up to $112,500 for a single act or failure to act.

Lyft responded within the time period, changing the TOS within one week. The company dropped the consent requirement, added instructions for users on how to unsubscribe from marketing text messages and still receive other communications from the company, and provided a new answer in the company’s FAQs page about how to opt out of receiving messages.

In a statement, the company said the changes were a move “to be as transparent as possible with consumers,” adding that Lyft “has not been using promotional texts to spam users with unwanted communications.”

To read the FCC’s citation in In the Matter of Lyft, Inc., click here.

Why it matters: The citations (a similar order was directed at First National Bank based on its requirement that users receive text messages in order to participate in online banking or Apple Pay) are just the latest example of the FCC’s recent efforts with regard to TCPA enforcement, after issuing its game-changing Declaratory Ruling and Order this summer. One Commissioner decried the Lyft citation as misguided and “just the first of many harmful real-life effects of the Commission’s march to drastically expand the scope of the TCPA.” “Today’s enforcement bureau action showcases once again the commission’s complete cluelessness when it comes to the tech economy, missing the point about how these free, popular, and entirely optional services actually work,” wrote FCC Commissioner Michael O’Rielly in a dissenting statement. “The bureau is targeting two innovators who are putting power in consumers’ hands to pay for their groceries or locate a safe ride directly from their mobile phones, for communicating with their customers on mobile phones.”

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Marketing Company Qualifies for TCPA Nonprofit Exemption

Considering whether the nonprofit organization exemption under the Telephone Consumer Protection Act applied to a telemarketer working on behalf of a charity, a federal court judge in Michigan ruled that because the charity controlled the content of the solicitation and consumers paid the charity directly, the defendant telemarketer was not liable under the statute.

DialAmerica Marketing operated a program for the Special Olympics of Michigan (SOMI) and made calls on the charity’s behalf to seek donations and sell magazine subscriptions. One call recipient filed a TCPA class action against the marketing company, claiming that she received 23 calls despite being registered on the federal Do Not Call Registry.

The defendant moved for summary judgment, relying on the Nonprofit Exemption at Section 227(a)(4) that exempts calls placed “on behalf of” a “tax-exempt nonprofit organization” from liability. U.S. District Court Judge Matthew F. Leitman agreed that the calls made by DialAmerica as part of its program with SOMI fell within the exemption.

The court noted that DialAmerica had learned from past mistakes. In the early 2000s, the company implemented a “Sponsor Program” where it sold magazine subscriptions and donated a portion of the proceeds to charitable organizations. DialAmerica asked the Federal Communications Commission in 2005 for a ruling that calls made as part of the program were covered by the Nonprofit Exemption. The agency denied the request.

DialAmerica launched a new program, the “Professional Fundraising Program,” with several changes from the first iteration. If a consumer purchased a magazine, the resulting contractual and business relationship was between the consumer and the charity and not DialAmerica. Bills were sent in the charity’s name and all monies flowed directly to the charity, which later transferred payment for fees and expenses to DialAmerica. The new program also featured the option for direct donations from consumers, with the charities receiving 100 percent.

SOMI signed on to the Professional Fundraising Program in 2008. The charity retained considerable control over the solicitation process, the court noted. It reviewed, approved and updated the fundraising script used by DialAmerica. Over a six-year period, the defendant made 28,267 magazine sales through the program and generated 1,191 direct donations, with SOMI netting $734,208.58 as a result.

Judge Leitman recognized that for-profit fundraisers can provide “critical support” to nonprofit entities that may have limited expertise, resources, and infrastructure. While DialAmerica’s first program failed to achieve the protection of the Nonprofit Exemption, the court distinguished the Professional Fundraising Program, where SOMI directed and controlled the fundraising and the content of the solicitations.

“Here, DialAmerica acts for SOMI’s benefit, in SOMI’s interest, and as SOMI’s common-law agent,” the court wrote. “Thus, DialAmerica calls ‘on behalf of’ SOMI when it makes telephone solicitations pursuant to the SOMI-DialAmerica Program. Its phone calls to [the plaintiff] therefore qualify for the Nonprofit Exemption.”

The court listed “substantial” evidence in support of its conclusion, from the parties’ contract terms to the solicitation script (controlled by the charity) that began with an explanation that DialAmerica is calling “for” SOMI. Further, consumers received all their communications from SOMI, not DialAmerica, and paid the charity directly. “Thus, when a DialAmerica solicitation call is successful, it results in a business and contractual relationship between the customer and SOMI, not between the customer and DialAmerica,” Judge Leitman wrote.

Rejecting the plaintiff’s contention that DialAmerica delivered its own commercial message, the court emphasized SOMI’s control and direction of the script, which “describes SOMI’s mission, extolls SOMI’s good works, and stresses SOMI’s financial needs,” as well as highlighting upcoming SOMI events.

“These undisputed facts demonstrate that DialAmerica’s calls under the SOMI-DialAmerica Program are placed ‘on behalf of’ SOMI and thus fall within the Nonprofit Exemption,” the court said, granting summary judgment for the defendant. “Indeed, the FCC has confirmed that calls like these—‘calls made by a for-profit telemarketer hired to solicit the purchase of goods or services or donations on behalf of a tax-exempt non-profit organization’—fit comfortably within the exemption. Thus, DialAmerica’s alleged calls to [the plaintiff] are not actionable under the TCPA.”

The court found only two unpublished decisions considering the application of the Nonprofit Exemption under similar circumstances, with both the Ohio Court of Appeals and a federal court in South Carolina holding that the calls in question did fall within the exemption.

To read the order in Wengle v. DialAmerica Marketing, Inc., click here.

Why it matters: Few courts have considered the TCPA’s Nonprofit Exemption, and DialAmerica’s Professional Fundraising Program appears to provide a road map for marketers partnering with tax-exempt nonprofits. The order emphasized that the charity exercised considerable control over the script of solicitation calls and that any ensuing business relationship (including the transfer of monies) existed between the consumer and the charity, not the marketing company.

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California Court Denies Class Cert in Yahoo TCPA Suit

Yahoo scored a victory recently when a federal court judge in California denied class certification in a Telephone Consumer Protection Act suit against the company.

Susan Pathman and Rafael Sherman failed to define an ascertainable class of individuals who allegedly received text messages from Yahoo, the court said, as they lacked an “administratively feasible” means of identifying class members. The suit targeted Yahoo’s “Welcome Message,” a text sent when a Yahoo user attempted to contact another individual on Yahoo’s online messenger service. Pathman and Sherman argued that they did not provide consent to receive the text in violation of the TCPA.

When the court denied Yahoo’s motion to dismiss the suit, Plaintiffs filed for class certification. They proposed a three-step process to ascertain the putative class. First, they would obtain Yahoo’s records from its Optin DB database, showing the time and date the Welcome Message was sent. Next, they would limit the unique mobile numbers to those assigned to certain carriers before comparing the mobile numbers listed in the database with a separate Yahoo database called UDB that contains the names, e-mail addresses, and mailing address information of account holders.

To fill any gaps, the Plaintiffs said they would subpoena carriers for information, use a reverse telephone number lookup, and/or send class notice to Yahoo e-mail accounts.

But U.S. District Court Judge Gonzalo P. Curiel agreed with Yahoo that Plaintiffs’ plan was not feasible, as they failed to demonstrate any source or combination of sources that exist to identify class members.

During discovery, Plaintiffs obtained Yahoo’s Optin DB database records as well as a complete list of mobile numbers assigned to a single carrier that received the Welcome Message over a one-month period in May 2013. But even with that sample, the Plaintiffs still lacked the names, e-mail addresses, and postal addresses of the individuals that owned those mobile numbers.

“Without this information, the class members’ identities cannot be ascertained, nor can these individuals be contacted,” the court said. “Plaintiff has not shown that her initial proposal for overcoming this hurdle—cross-referencing these phone numbers with information contained in Yahoo’s UDB—is likely to provide complete or even accurate information for class members.”

Whether Yahoo users chose to provide true names or contact information when they registered for an account was entirely voluntary, the court said, and Yahoo demonstrated multiple instances where a single mobile number was associated with multiple Yahoo accounts, either because someone miskeyed an entry or the number was later reassigned to a new user. Pathman herself demonstrated this problem, as the mobile number associated with her account was also linked to a different account, the court noted.

A reverse directory would provide minimal assistance and be of questionable accuracy, Judge Curiel wrote, adding that a subpoena to mobile carriers would also not save the day, as cellular carriers have refused to turn over similar records based on California privacy law. Emailing Yahoo users would be equally unworkable, the court added, as recipients would have to recall whether or not they received a single text message from over two years ago, and it would be highly improbable that they retained the message.

“In sum, the Court finds that even if Plaintiffs were to utilize all of these methods and attempt to cross-reference massive amounts of data to identify class members, Plaintiff still would be left with a data set of questionable reliability that covered only some unknown fraction of the putative class,” Judge Curiel said. “Plaintiff’s burden is to provide an objective, reliable, and administratively feasible method of ascertaining the class. Plaintiff has not met her burden.”

The court also found that Pathman was neither a typical nor adequate class representative. As the holder of two Yahoo accounts, Pathman agreed to the defendant’s terms and conditions on two different occasions and may have consented to receive the Welcome Message. “This profile would put Plaintiff at odds with class members in several other consent groups,” the court said, and put her “in a position of having interests that are not typical of the entire class and, thus, being preoccupied with unique defenses.”

Given all of these concerns, the court agreed with Yahoo that a class action was not superior to individual actions. Even if the Plaintiff narrowed the class to the one month for which she had some data, “Rule 23 seeks to ensure fair and efficient resolution of the controversy,” Judge Curiel wrote. “Plaintiff’s highly circumscribed class definition seems to offend the very purpose of the rule,” and Yahoo would still be subject to suit for every other month it sent the Welcome Message—and even for the same month in 2013, to the extent the phone numbers involved were assigned to different cellular providers.

To read the order in Sherman v. Yahoo! Inc., click here.

Why it matters: Yahoo dodged a class action bullet in the court’s decision, and it remains to be seen if the Plaintiffs will elect to move forward on an individual claim against the company—a seemingly cost-prohibitive move, even if they win trebled damages of $1,500 under the statute. Facing four other class actions over the Welcome Message, Yahoo will likely attempt to replicate its success by arguing that class treatment is not the superior method for resolving the dispute in those cases.

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